Veteran Minnesota Tax Credit

TAX CREDIT, TAX CREDIT For Military Service!

You may already know about this benefit, I just learned about it and thought there may be others like me that did not have the information. The 2008 omnibus tax bill in Minnesota (Laws 2008, ch. 366) provides for an income tax credit for past military service. It is a $750.00 credit. A credit is a deduction dollar for dollar against income tax owed. The credit took effect in tax year 2009 for returns filed in 2010. Eligible filers can sue form M-1C to claim the credit.

So who is an eligible filer?

To qualify for the credit, a veteran must:

•have served in the military (this includes the National Guard and Reserves)for at least 20 years;

•have a service-connected disability rated by the U.S. Department of Veterans Affairs (VA) as being 100 percent total and permanent; or

•be eligible for military retirement pay.

A veteran must have at least $750.00 of state income tax liability to receive full credit amount. A veteran with less than $750.00 in income tax liability is eligible for a credit up to the amount of the tax. What this means for example- In tax year 2014, a single veteran without dependents with the standard deduction, would need to have earned $24,069.00 (Federal Adjusted Gross Income) to receive the full credit.

Unfortunately, the credit is not available to high income earning veterans. The military service credit is phased out for veteran with Federal Adjusted Gross Income (FAGI) of $30,000.00 or more. When $30,000.00 of income is reached, the credit is reduced by 10 percent in excess of $30,000.00. When income (FAGI)is over $37,500.00 there is no longer a credit available to take.

Social Security benefits are not included in FAGI, so receipt of benefits will not subject an individual to the income based phaseout. However, if a veteran has no taxable income or income over $37,500.00 there is not tax credit.