What Is Minnesota Schedule M1SA and How Does It Work?

Minnesota taxpayers who itemize deductions on their state return must use Schedule M1SA to report eligible expenses. This form helps determine whether itemizing or taking the standard deduction results in a lower tax bill.

Because Minnesota’s tax code differs from federal rules, certain adjustments may be required when transferring deductions from a federal return. Understanding how this schedule works ensures taxpayers claim all available deductions correctly.

Function in Personal Taxes

Minnesota Schedule M1SA allows taxpayers to itemize deductions instead of taking the standard deduction, potentially reducing taxable income. Since Minnesota’s tax system does not automatically follow federal itemized deductions, this form ensures only deductions permitted under state law are applied. As a result, taxable income on a Minnesota return may differ from the federal return.

For 2024, Minnesota’s standard deduction is $27,650 for married couples filing jointly, $20,800 for heads of household, and $13,825 for single filers. If total itemized deductions exceed these amounts, itemizing may lower the tax bill. However, Minnesota has its own rules regarding which deductions are allowed, meaning some expenses that qualify federally may not be permitted at the state level.

Minnesota also phases out itemized deductions for higher earners. In 2024, taxpayers with an adjusted gross income (AGI) above $233,150 for single filers and $350,000 for married couples filing jointly may see a reduction in their deductions. This phaseout gradually limits the benefit of itemizing, making it important to calculate whether itemizing still provides an advantage.

Key Deduction Categories

Minnesota Schedule M1SA allows taxpayers to itemize specific expenses that can reduce taxable income. While some deductions align with federal rules, others have state-specific limitations or adjustments.

Medical and Dental Bills

Medical and dental expenses are deductible only if they exceed 7.5% of AGI, matching federal rules. For example, if AGI is $50,000, only medical costs above $3,750 would be deductible. Eligible expenses include doctor visits, prescription medications, hospital stays, and long-term care services. Health insurance premiums may qualify if they are not paid with pre-tax dollars.

Minnesota follows federal guidelines outlined in IRS Publication 502 regarding qualified medical expenses. However, any reimbursement from insurance or employer-sponsored plans reduces the deductible amount. Cosmetic procedures, non-prescription drugs (except insulin), and general health expenses like gym memberships do not qualify. Taxpayers should keep detailed records, such as receipts and insurance statements, to substantiate these deductions in case of an audit.

Mortgage Interest

Homeowners can deduct mortgage interest on a primary residence and a second home, provided the loan meets Minnesota’s definition of acquisition debt—meaning it was used to buy, build, or substantially improve the property. Refinanced loans may also qualify, but only the portion of interest related to the original loan balance or improvements.

Unlike federal tax law, Minnesota does not allow a deduction for home equity loan interest unless the funds were used for home improvements. For example, if a homeowner takes out a $30,000 home equity loan to renovate their kitchen, the interest is deductible. However, if the loan is used to pay off credit card debt, the interest does not qualify. Taxpayers should review mortgage statements and loan agreements to ensure they are claiming only eligible interest payments.

Charitable Contributions

Donations to qualified charitable organizations are deductible, but Minnesota has specific rules regarding eligibility and documentation. Contributions must be made to IRS-recognized 501(c)(3) organizations, religious institutions, or government entities. Donations can be in cash, property, or securities, but non-cash contributions require additional documentation, such as a receipt or appraisal for items valued over $500.

Minnesota does not impose a percentage limit on charitable deductions, unlike federal rules that cap deductions at 60% of AGI for cash donations. However, taxpayers must maintain proper records, including bank statements or written acknowledgments from the charity for donations over $250. If a taxpayer receives goods or services in exchange for a donation, only the portion exceeding the fair market value of the benefit received is deductible. For example, if a taxpayer donates $100 to a charity and receives a dinner valued at $40, only $60 is deductible.

Interaction with Federal Deductions

Minnesota’s approach to itemized deductions differs from federal tax rules, requiring adjustments when transferring information from a federal return to Schedule M1SA. Some deductions are fully allowable at both levels, while others are subject to state-specific limits or disallowed entirely.

One key difference involves the deduction for state and local taxes (SALT). The federal government imposes a $10,000 cap on SALT deductions for individuals and married couples filing jointly. Minnesota does not impose this limit, allowing taxpayers to deduct their full amount of state and local income or sales taxes, as well as real estate taxes. This can make itemizing more advantageous at the state level, especially for homeowners in high-tax areas who exceed the federal cap.

Miscellaneous itemized deductions are another area where federal and state rules diverge. The Tax Cuts and Jobs Act (TCJA) eliminated most miscellaneous deductions on federal returns through 2025, including unreimbursed employee expenses and tax preparation fees. Minnesota still allows certain miscellaneous deductions that were previously permitted under federal law before the TCJA. For instance, educators who incur out-of-pocket expenses for classroom supplies beyond the federal educator expense deduction may be able to claim additional deductions on their state return.

Filing Requirements

Taxpayers who itemize on their Minnesota return must complete Schedule M1SA and submit it alongside Form M1, the state’s individual income tax return. Accuracy is essential, as errors can trigger audits or delay refunds. Since itemized deductions require detailed substantiation, taxpayers should retain receipts, bank statements, and other proof of expenses for at least three years in case of review by the Minnesota Department of Revenue.

Electronic filing is encouraged, as it reduces processing time and minimizes the risk of miscalculations. Most tax software programs integrate Minnesota’s filing requirements, automatically populating Schedule M1SA based on the taxpayer’s federal return, but manual review is still necessary to ensure compliance with state-specific rules. Those filing on paper must attach all relevant schedules and worksheets to support their deductions. Any omitted documentation could result in disallowed deductions or a request for additional information.

Adjustments for Minnesota

Minnesota’s tax code requires modifications to federal itemized deductions before they can be applied to a state return. These adjustments ensure only expenses recognized under state law are deducted, leading to differences in taxable income compared to a federal return.

One significant adjustment involves the deduction for mortgage insurance premiums. While federal tax law allows taxpayers to deduct these premiums as mortgage interest if they meet income requirements, Minnesota does not permit this deduction. Taxpayers who claimed this expense on their federal return must add it back to their Minnesota taxable income.

Deductions for casualty and theft losses are also more restrictive at the state level. While the federal government allows these losses under certain disaster-related conditions, Minnesota only permits them if they occurred in a federally declared disaster area and were not reimbursed by insurance.

Another common adjustment relates to the deduction for gambling losses. Federal tax law allows taxpayers to deduct gambling losses up to the amount of their reported gambling winnings, provided they itemize and maintain proper documentation. Minnesota does not allow this deduction, meaning taxpayers must add back any gambling losses deducted on their federal return. Additionally, while federal law permits deductions for unreimbursed employee business expenses in certain professions, Minnesota only allows this deduction for specific occupations, such as performing artists and fee-based government officials.

These differences highlight the importance of reviewing Minnesota’s tax code before finalizing an itemized return.