2015, 2016 Minnesota earned income tax credit MN EITC

The Minnesota Working Family Credit is a refundable credit for working individuals whose income is below a certain level. It is similar to the federal Earned Income Tax Credit (EITC). Both credits are refundable, which means you can receive a refund even if you don’t owe tax.

What is the Minnesota EITC?

The Minnesota working family credit (WFC) is also a tax credit that is a percentage of earnings. Before 1998, the WFC was set as a percentage of the federal EITC. Legislation enacted in 1998 restructured the WFC as a percentage of earnings. This restructuring reduced work disincentives caused by interactions with income and payroll taxes and the state’s welfare program. Like the EITC, the WFC is refundable.

 

What is the Minnesota Working Family Credit?

In 2010, 349,510 Minnesotans claimed $666 million in earned income tax credits. Of this amount, $84 million offset liability, and the remaining $582 million was paid as refunds. The 349,510 claims represented 13.6 percent of all federal returns filed by Minnesotans. The average EITC claimed by Minnesotans was $1,906.

 

Calculating the MN EITC

Minnesota, as well as 24 other states, offers a state version of the EITC. Like the federal credit, it is fully refundable. Most state credits simply equal a percentage of the federal credit. Minnesota’s credit initially followed that pattern. In 1998 the legislature restructured Minnesota’s credit so that it equals a percentage of earned income, rather than a percentage of the federal credit. The 1999 Legislature increased the percentage of the first tier of income that qualifies for the credit. Claimants must continue to meet federal eligibility requirements. Twenty-four other states and the District of Columbia provide a state version of the EITC. In most cases the state credit equals a percentage of the federal EITC.

 

Who is eligible for 2015 Minnesota earned income tax credit?

To be eligible for the state credit, you must be eligible for the federal credit. You can check if you are eligible for the federal credit using the EITC Assistant on the IRS website. To see if you are eligible for the state credit, complete Schedule M1WFC, Minnesota Working Family Credit. To claim the credit, you must file a state tax return (Form M1, Individual Income Tax) and Schedule M1WFC. For both the state and federal credit, the amount you receive depends on your income, filing status, and number of “qualifying children.” Minnesota uses the same definition as the IRS for “qualifying child.” For more information, see “A Qualifying Child” on the IRS website.

 

Part-year residents and MN EITC

Part-year residents are eligible for the credit even if they move into or out of Minnesota during the year. Part-year residents must adjust their credit based on the percentage of their income that’s taxable to Minnesota. To do so, complete Schedule M1NR, Nonresidents/Part-Year Residents and the worksheet in the Schedule M1WFC instructions when calculating your Working Family Credit.

 

Who is not eligible for 2015 Minnesota earned income tax credit?

You are not eligible for the Minnesota earned income tax credit if:

  • you file with an Individual Taxpayer Identification Number (ITIN)
  • you are at the higher end of the income eligibility range for the federal credit, are married filing a joint return, and/or have three or more children (beginning in tax year 2012)
  • you are a full-year nonresident (beginning in tax year 2015)
Note: For tax years 2014 and earlier, nonresidents can claim the Working Family Credit. You must adjust your credit based on the percentage of the income that’s taxable to Minnesota.

More Information about  2015 Minnesota earned income tax credit

Seventy-two percent of all working family credits went to families with one or more children. These families received about 97 percent of the total amount of credits paid in 2012. Individuals without children filed 28.4 percent of returns claiming credits, but received only 2.9 percent of the total amount of credits. Claimants with children received most of the total amount of credits because these families qualify for a higher maximum credit than do claimants without children. The distribution of earned income tax credits is similar.