If you are a Minnesota resident, all of your income is generally subject to the state Individual Income Tax, regardless of where it was earned.
However, if you temporarily worked or received some type of income in another U.S. state or Canadian province, that government may have collected tax on the income. You may receive a credit for the taxes paid to the other state or province by filing Schedule M1CR, Credit for Income Tax Paid to Another State
Only residents and part-year residents of Minnesota are eligible for this credit with the following exception. If your home state does not offer a similar credit, and you received income taxable in both Minnesota and your home state, you may avoid double taxation of this income by filing Schedule M1CR.
For Minnesota residents:
- Include a copy of the other state's tax return and completed Schedule M1CR.
- If claiming this credit for taxes paid in multiple states, include copies of tax returns and a separate Schedule M1CR for each state. Combine the total for all other states on Form M1C.
For residents of other states:
- If your home state taxes income you received in Minnesota, you must submit documentation showing that the other state will not grant a credit for taxes paid in Minnesota.
Reciprocity – You can’t claim this credit for income that is not counted as taxable income on your Minnesota return because of a reciprocity agreement with Michigan or North Dakota.
Extended Statute of Limitations
– If you report income only to Minnesota and another state later taxes that same income, you typically may claim this credit up to 3½ years after tax was due in Minnesota. If the other state assesses tax after Minnesota’s limit has expired, you may still claim this credit for up to one year after you paid tax to the other state. You must submit proof that the this income was validly taxed by the other state, and that you paid the tax. For more information, view the statute (M.S. 290.06, subdivision 22 [f])