How to Complete Schedule M1LTI for the MN Long-Term Care Insurance Credit

Minnesota offers a tax credit to help offset the cost of long-term care insurance, providing financial relief for those planning for future healthcare needs. To claim this benefit, taxpayers must complete Schedule M1LTI and meet specific eligibility criteria.

This guide walks through the key steps in completing Schedule M1LTI, from determining eligibility to reporting the credit on your return.

Qualifying Insurance Policies

Not all long-term care insurance policies qualify for Minnesota’s tax credit. To be eligible, the policy must be a qualified long-term care insurance contract under Section 7702B of the Internal Revenue Code, covering services such as nursing home care, home health care, or assisted living. Policies with a cash surrender value, like traditional life insurance, do not qualify.

The policy must be issued by an insurer licensed in Minnesota to ensure compliance with state consumer protection standards. It must also be guaranteed renewable, meaning the insurer cannot cancel it as long as premiums are paid. Policies that allow for premium increases remain eligible but must follow state regulations on rate adjustments.

Additionally, the policy must provide benefits not reimbursable by Medicare. Long-term care insurance is designed to cover services that Medicare does not, such as extended nursing facility stays or in-home personal care. If a policy duplicates Medicare coverage, it does not qualify for the credit.

Requirements to Claim the Credit

Only full-year Minnesota residents can claim the credit. Part-year residents and nonresidents are not eligible.

The credit applies only to premiums paid by the taxpayer for themselves, their spouse, or a dependent. If multiple family members contribute to a policy’s cost, only the person who directly paid the premiums can claim the credit. For example, an adult child can claim the credit only if the parent qualifies as their dependent under IRS rules.

The credit is nonrefundable, meaning it can only reduce tax liability to zero and does not generate a refund. If the credit exceeds the taxpayer’s total state income tax, the unused portion is forfeited. Those with little or no tax liability may not benefit from claiming the credit.

Completing the Schedule

Accuracy is essential when filling out Schedule M1LTI. The form requires basic taxpayer information, including name and Social Security number, which must match the details on the main Minnesota income tax return.

Taxpayers must report the total amount paid during the tax year for eligible long-term care insurance. Only out-of-pocket expenses qualify—any portion covered by an employer, deducted as a business expense, or reimbursed through other means cannot be included. Keeping records such as bank statements or insurer-provided payment summaries helps substantiate the claim.

The credit equals 25% of eligible premiums paid, with a maximum of $100 per covered person. For joint filers, each spouse can claim the credit separately if both have qualifying policies, allowing a maximum credit of $200 per couple. The form includes space to list each covered individual and their premium costs.

Reporting the Amount on Your Return

After calculating the credit on Schedule M1LTI, taxpayers must transfer the amount to Form M1, Minnesota’s individual income tax return. The credit is entered on the appropriate nonrefundable credits line. Since the credit can only offset tax liability and does not generate a refund, taxpayers should verify their total tax due before applying the credit.

Under Minnesota law, any unused portion of the credit cannot be carried forward to future years. If the credit exceeds the total tax liability, the difference is lost. Taxpayers expecting a low tax liability should consider adjusting their withholding or estimated payments earlier in the year.

If claiming multiple credits, the order in which they are applied matters. Some credits, such as the Working Family Credit, may reduce taxable income before nonrefundable credits like the long-term care insurance credit are factored in. Reviewing Form M1 instructions ensures credits are applied in the most beneficial sequence.

Required Documentation

Proper documentation is necessary to support the credit claim. Taxpayers should keep detailed records of long-term care insurance payments and policy details. Insurers typically provide annual statements summarizing total premiums paid, which serve as primary proof of payment. If unavailable, bank records or canceled checks can also verify expenses.

The policy must meet state and federal requirements, so retaining a copy of the contract is advisable. It should clearly state that it qualifies as a long-term care insurance policy under Section 7702B of the Internal Revenue Code and that it is issued by a licensed insurer in Minnesota. If the policy has been renewed over multiple years, keeping records of past premium payments and renewal notices helps establish a history of coverage.

If claiming the credit for a spouse or dependent, additional documentation may be needed to confirm the relationship and financial responsibility for the premiums. Joint filers should ensure both names appear on payment records if each is claiming a credit. If audited, taxpayers may need to provide proof that the covered individual was a dependent under IRS guidelines, such as tax returns or other financial records.