How do we file taxes if my spouse lives in MN and I live in PA?

[giskard]

MN requires that state tax be filed the same way as federal taxes. How do we file our taxes jointly? When getting credit in MN for taxes paid in PA, do we include the local and state income taxes? 

[DanielV01 · Accepted solution]

You are correct.  Minnesota does require you to file a joint resident return if you file a joint federal return.  For the credit for taxes paid to another state, Minnesota only considers state taxes.  They do not give a credit for the local taxes.  Here is a link to the MN tax credit form:  http://www.revenue.state.mn.us/Forms_and_Instructions/m1cr_16.pdf, On page 2 of the document, you will see that the local taxes are not included.  It likely wouldn't affect the result, however, as Minnesota will give a credit up to the amount of tax that they would assess on the same income.  So if the PA tax rate is higher, your PA state tax liability will leave no additional tax on that income to Minnesota.

Prepare the PA return in TurboTax first so that you can apply the credit correctly on the Minnesota return.  

[giskard]

So, Minnesota will tax our total combine income, regardless of where that income was earned? My spouse's income was earned in Pennsylvania. He doesn't live or work in MN, so can they actually tax him? Would we fill out a M1 and M1NR or the M1CR?

[DanielV01]

M1 for the resident return and M1CR for the tax credit.  However, this allows you full access to the credits that Minnesota has on their return.  If you were filing separately or a nonresident return, many of these credits would not be available.

[atyogurt]

Hi, 

My spouse is military with his home of record and current SLR as Minnesota.  I am a resident of Hawaii and all of my income was earned in Hawaii.  We wanted to do a "married joint" federal return and "married but separate" state returns, but found Minnesota does not allow different state and federal filing status while Hawaii does.  What is the best way to move forward?  Should we/can we file "MFJ federal with MFJ Minnesota and MFS Hawaii"?

[MaryK4]

You are required to file the Minnesota as Joint. 

You will have two options:  Nonmilitary spouses may elect to use the same residence as the servicemember for tax purposes under the Veterans Benefits and Transition Act of 2018.  This will make you a Minnesota resident and you would file Hawaii as a nonresident if you had any withholding.  

Or You can file the Hawaii tax return and use the taxes you paid in Hawaii as a credit on the Minnesota tax return.

[ Edited 4/12/2020 | 6:24pm PST ] 

@atyogurt

[atyogurt]

Would I be able to file both Hawaii and Minnesota as MFJ?

For Hawaii, I would include a subtraction of my husband's "non-resident military pay" so that his income is NOT taxed in Hawaii.

For Minnesota, I would include a tax credit since I already paid my state taxes to Hawaii.  Another question I have is, do we actually need to file for MN at all?  MN does not tax active duty military, and if I am a non-resident with Hawaii income only... do we need to file at all?

By doing so, I would not need to mail separate state returns and would be able to e-file everything without overpaying or underpaying.  Is there anything wrong with this route?

@MaryK4 

[DMarkM1]

You may not need to file in MN.  Here is a link covering the situations in which you won't need to file.

Since your spouse has only military income and you are stationed outside of MN but are a military resident of MN he does not need to file in MN. Since you are a non resident of MN have no MN income you do not need to file in MN.    

[atyogurt]

Hi, 

What I have already done: Filed MFJ federal return and MFS Hawaii state return (on my income only).  Husband is active duty military and does not pay state taxes to Minnesota (his state of residence) at all.

Question 1) Do we need to file a Minnesota return?

Question 2) If we must, MN requires us to have the same filing status as our federal return.  This means my income will be included.  How do I input the tax credit for tax I already paid to Hawaii? (What do I put in "total income taxed in both Minnesota and another state" box? Just my AGI or combined federal AGI?)

Question 3) Will this tax credit cover all of MN's state tax on our income so that our return is net $0? 

Question 4) Does the fact I filed MFS Hawaii affect the MFJ Minnesota credit?