RaifH
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Yes, a full-year resident is required to file a Minnesota tax return if their taxable income from all sources exceeds $12,525. Aside from some rare and often small adjustments, this is the amount on her federal Form 1040 Line 11. 

 

All her income is considered Minnesota income because Minnesota and North Dakota have a reciprocal agreement. That means when you are filling out the nonresident return for her for North Dakota, you should enter $0 as North Dakota wages to get a full refund of the state taxes withheld by North Dakota.

 

As far as whether she is considered your dependent is concerned, the deciding factor in most cases is whether or not she provides more than half her own support if she is a full-time student under age 24. The IRS provides a worksheet that you may find useful to determine if your daughter does provide more than half her own support. 

 

While the issue of support determines whether or not she can be claimed as a dependent, there is no easy way to play with it to see which way provides the maximum benefit. You can remove her from your return and add her back to see the impact on your taxes. Likewise, on her return, you can select and unselect whether she can be claimed by someone else in the My Info section of her return. 

 

Two elements to consider are her education credits and the recovery rebate credit. If you do not benefit from her education credits due to the AGI limit and she supports herself, it will probably provide a better tax outcome to not claim her. This is especially true if you claimed her in 2020, because she would then be able to claim the recovery rebate credit. See Question C9 at the link above for her exact circumstance. 

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