How do I know if my minnesota public pension is eligible for a tax deduction with new law??

[ljr2456]

the new minnesota law does not give specific details for the exemption

[JohnW152]

Based on your question, you're most likely referring to the Qualified Retirement Benefit Subtraction.  See the qualifications below.

According to the 2023 Minnesota Individual Income Tax Instructions:

If you received a pension for certain public service, there is a new subtraction for pension income. You may be eligible for a subtraction up to $12,500 ($25,000 for a married taxpayer filing a joint return or qualified surviving spouse). 

Line 29 — Qualified Retirement Benefits Subtraction in 2023 Schedule M1M, Income Additions and Subtractions provides additional information:

If you received certain pension pay for public service, you may be able to reduce your taxable income. To qualify, your pension pay must be taxable on your federal return and paid to you as a member (or for survivor benefits) under plans governed by:

• Chapter 353 (basic member of the Public Employees Retirement Association)

• Chapter 353, sections 353.63 to 353.666 (Public Employees Police and Fire plan)

• Chapter 353E (basic member of the Local Government Correctional Service Retirement Plan)

• Chapter 354 or 354A (basic member of the Teachers’ Retirement Association)

• Chapter 3A (basic member of the Legislators plan)

• Chapter 352B (State agency law enforcement retirement fund)

• Any federal government plan based on service for which no Social Security benefits were earned

• A plan created by another state or its political subdivisions or District of Columbia, if the other state allows a similar or reciprocal subtraction or exemption for the plans mentioned above

Note: You cannot receive this subtraction for pension payments based on service for which you also earned credit toward Social Security benefits and are therefore eligible to receive Social Security benefits based on the same service.

If your adjusted gross income is greater than these amounts based on your filing status, you do not qualify for this subtraction, and you need not complete the Worksheet for Line 29:

• Married Filing Jointly or Qualifying Surviving Spouse - $118,000

• Single or Head of Household - $96,000

• Married Filing Separately - $68,000

[Zabina]

I do not qualify for this because,  "You cannot receive this subtraction for pension payments based on service for which you also earned credit toward Social Security benefits and are therefore eligible to receive Social Security benefits based on the same service." However,  online TurboTax Deluxe assumes I do qualify. Help! Did I miss the question?

[AmyC]

Go back through your state program and deselect the box that it is a qualified public retirement plan. If the box is not selected, the entire amount will go through as taxable.

@Zabina 

[TSwz]

turbotax applied this to my mn state tax, and said my state return was complete and checked for errors, now I owe the state $300.00 is this turbotax fault

[Headachelevel10]

How do you know if a person is a Basic or Coordinated Member? Doing my aunt's return and she is long retired. I don't think she understands the question. Is there something on the 1099-R that would tell me?

[DaveF1006]

It depends. According to 2024 Schedule M1QPEN Instructions, the main difference is if your aunt had contributed to social security at the same time. If she contributed to social security at the same time, she was a coordinated member. If she didn't, she was a basic member.

it also mentions in the instructions that a pension member whose service began as a basic member may have been converted to a coordinated member during their career. Read that section entitled Basic to Coordinated Member Conversion. In that section, there is a table that lists each qualified public pension and the date when basic members were converted to coordinated members. If your aunt's pension plan is part of this list, then she may be a coordinated member.

You might also examine any pension documents or contact the plan administrator if you are still unclear on whether or not your aunt is a basic or coordinated plan member.

[Headachelevel10]

Thank you Dave! We did end up calling the plan administrator and they told us she is NOT eligible for the deduction, as she was earning social security credits at the same time.  Also, they mentioned that it only applies to MN State Patrol and one other agency (that I can't remember now!)

I wish the 1099-R would have a box checked to answer this question! But...that would be too easy, right? Lol