What Is the Minnesota Past Military Service Credit?
Minnesota offers a nonrefundable tax credit for past military service. Learn how this state tax benefit is structured for qualifying veterans and retirees.
The Minnesota Past Military Service Credit is a state tax benefit for certain military veterans. Unlike a deduction, which reduces taxable income, a credit provides a dollar-for-dollar reduction of a taxpayer’s Minnesota income tax liability. This financial acknowledgment is for former service members residing in the state who meet specific service and income criteria.
Eligibility for the Credit
To qualify for the credit, a veteran must have separated from military service before the end of the tax year. A requirement is that the veteran’s discharge from service must have been honorable. The nature of the military service itself is also defined for the purposes of this credit.
“Past military service” encompasses time spent on active duty in the U.S. Armed Forces. For individuals who served in the National Guard or Reserves, their service qualifies if they were called to federal active service under Title 10 of the U.S. Code. Routine training or state-level activations do not meet this requirement.
Veterans must also meet one of three additional conditions. The first is having served at least 20 years in the military. The second is having a service-connected disability rating of 100% total and permanent, as determined by the U.S. Department of Veterans Affairs. The third is receiving a military pension or other retirement pay for their service. Taxpayers will need their military discharge papers, such as the DD Form 214, to verify their service details.
Calculating the Credit Amount
The maximum credit amount is $750 per eligible individual. The actual credit a taxpayer receives may be less, as it is subject to income limitations. The credit begins to phase out for taxpayers whose Minnesota adjusted gross income exceeds certain thresholds. For the 2024 tax year, the credit is available to veterans with a Minnesota adjusted gross income of less than $37,500.
The calculation for the reduced credit is based on a formula provided in the state’s tax instructions. A worksheet is available to guide taxpayers through this calculation if their income is above the threshold. The formula determines the excess amount and applies a phase-out percentage, which is then subtracted from the maximum $750 credit.
This is a nonrefundable credit, meaning it can reduce a taxpayer’s income tax liability to zero, but it cannot result in a tax refund. If the calculated credit is more than the tax owed, the taxpayer does not receive the excess amount back. A veteran who claims the state’s subtraction for military retirement pay is not eligible to claim this credit in the same tax year.
How to Claim the Credit
After confirming eligibility and calculating the credit amount, a veteran must complete and file Schedule M1C, Other Nonrefundable Credits, with their state tax return. This form can be downloaded from the Minnesota Department of Revenue’s website.
On Schedule M1C, the taxpayer will find a line for the “Credit for Past Military Service” and must enter their calculated credit amount. The instructions for Schedule M1C include the worksheet needed to determine the credit amount for those impacted by the income phase-out.
Once Schedule M1C is completed, the total amount of nonrefundable credits is transferred to the main Minnesota income tax return, Form M1. This step ensures the credit is properly applied against the taxpayer’s total tax liability.