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posted Mar 11, 2024 4:20:16 PM

Recently Married - from 2 different states, keeping our homes and living in both part time - deciding how to file

I’m a retired fed. I live in SD and besides my pension and social security I do short term rentals with my home in SD and I have a rental property in MN that I inherited about 20 years ago (and that I’ve never turned a profit on) – and that I sold this past year on a contract for deed. I also take occasional withdrawals from my regular IRA. I’ve never filed state tax forms in either SD or MN.

 

In 2023 I married. My wife owns a home in NE where she operates a painting business as a sole proprietor. She also does short term rentals with her home. And she draws social security. She presently qualifies for a 100% property tax exemption based upon her age (67) and income.

 

We spend significant time in both homes and have been planning to maintain residency in separate states

 

I believe since I sold my rental property in MN I will have to file MN state tax forms this year.

 

We want to file our taxes both federal and state to minimize our taxes taking into account the property tax break my wife presently receives and tax preparation costs.

 

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1 Replies
Expert Alumni
Mar 19, 2024 5:45:09 AM

My understanding from what you say is:

 

  • You are a resident of SD, so no state tax return here.
  • You have a MN rental property and have never filed a MN Tax Return.
    • My concern here is  MN requires nonresidents to file a tax return if your Minnesota gross income meets or exceeds the minimum filing requirement ($13,825 for 2023).
    • I know you said you never had a profit, but the requirements in MN is for gross income. This would be your total rents received, before any deductions. Did you have total rents received that exceeded the amount from the table below? You may have had a filing requirement for some years in MN. This is separate from your initial question, so let me continue.

 

 

  • Wife is a NE resident and receives the Homestead Exemption for her RE Taxes. 
    • She does not qualify for the Homestead Exemption if she is using her home as a short term rental. 
    • To qualify for the Homestead Exemption, it must be owner occupied.
    • If married, regardless of filing status and spouse residency or ownership, income from both spouses will be considered.

 

Because you want to file your taxes, both federal and state, to minimize your taxes would be to file Married Filing Jointly. It is almost always better to file jointly. This will save on preparation costs as well since you are filing one return together instead of separate returns.

  • You will file a Resident Nebraska return.
  • You will file a Nonresident Minnesota return.

 

Additional resources:

Filing Jointly vs Separately 

Nebraska Homestead Exemption

Who Must File an Income Tax Return (MN)