For most people, spring 2024 tax filing federally for the 2023 tax year will not be much different. But there are a few Minnesota-specific changes that may be of interest.

Federally

There are no major changes federally. The IRS only took this opportunity to remind taxpayers of the benefits of their online accounts, estimated tax deadlines, EITC and ACTC refund hold dates, and encourage electronic filing and direct deposits of refunds.

And of course there are the inflation adjustments to the income tax bracket thresholds.

The popular 2021 charitable deductions line item that went away on 2022’s tax form has not returned.

In Minnesota

There are more changes coming to Minnesota’s 2024 tax filing season. Here are the ones I consider most relevant.

First, Minnesota chose to become conformant with federal tax law, through May 1 2023, including the SECURE Act 2.0.

Federally we’ve had a Net Investment Income Tax since 2013. Now in Minnesota we have one starting in 2023. Minnesota’s Net Investment Tax will be 1% on the net investment income of over $1 million, for individuals, trusts, and estates, which will impact less people and for a lesser dollar amount than the federal NIIT.

Many states with state income taxes do not tax any retirement pensions, or specifically public pensions. Minnesota had previously fully taxed all pension income, however beginning with 2023 there will be an income subtraction to only partially tax public pensions. These pensions had to be for positions that were not Social Security eligible, are capped at a certain dollar amount, and phases out steeply based on AGI.

The Social Security income subtraction calculation has been revised, and phases out steeply.

High income earners will have their standard or itemized deduction benefits reduced.

And student loan forgiveness that is not part of public service loan forgiveness, and would therefore be considered taxable income, is excluded from state taxation for 2021-2025.

Conclusion

The income tax changes for the spring 2024 tax season will be only minorly impactful for tax return complexity on most individual income tax returns. And given the tax seasons tax preparers have been dealing with for the past several years, this is a welcome lull.