Non-resident Minnesota tax filer on the sale of second home

[breckenridge69]

I am a Tennessee (TN has no state tax) resident and sold a second home in Minnesota. After expense of sale I had long term capital gains of 14,980. When filling out my Minnesota state tax form through Turbotax line 9 of the state tax form says my Minnesota taxable income is 48,518. They have included IRA ,pensions and annuities income. Being a non-resident filer shouldn't"t I only pay on the 14,980? The form did consider that since I was a non-resident only a percentage of the total tax due is due by me. My question is: Should my income from IRA, pensions and annuities be taxable in Minnesota if I am a non-resident in that state?

[ErnieS0 · Accepted solution]

Yes. You should only pay tax on the $14,980. However Minnesota prorates your actual tax liability based on the percentage of Minnesota income. This results in a higher tax, but many states do it this way.

First, Minnesota comes up with a base tax as if all your income (including IRA, pensions and annuities) were taxable to MN. Then it multiples the base tax times the ratio of MN/non-MN income.

For example, if you earned $10,000 total and $3,000 in MN, your tax rate would be based on $10,000. Say the MN tax on $10,000 is $2,000. Then your tax would be 30% ($3,000/$10,000) of $2,000 or $600.

You can see the calculation on Form M1 line 13.

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[texaspep]

I currently live in Texas.  While filling out my Minnesota tax form for the sale of my second home,  it states that Minnesota doesn't require me to file based on the amount of capital gain.  Should I file anyway?  BTW, this would be the first time filing with Minnesota since there isnt other Minnesota income generated.

[PattiF]

No, you should not file a return if you are not required to file a return with Minnesota as a Nonresident. You mentioned that the capital gain on the sale of the second home does not meet the amount that requires a tax return. The instructions that you read say that you do not need to file. There will not be a problem if you do not file a return that is not required.

Please see this link to the Minnesota Nonresidents filing requirements.

@texaspep