Families Tax Bill. Provision What Changed? Who Qualifies? What's the Benefit? Working Family Credit. Marriage Penalty Relief

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1 Working Family 2014 Tax Bill Families Increased benefit for all who receive the credit. Simpler calculation that s easier to understand. 330,000 current and 13,000 new single or married taxpayers who meet income limits. (No Children: $14, Child: $43, Children: $49,000.) 345,000 families will receive an average increase of $140 over the current benefit (which averages $590). For tax year 2014 forward. Marriage Penalty Relief Dependent Care Student Loan Interest Savings Accounts Employer Assistance Employer Adoption Assistance Mortgage Debt Forgiveness Mortgage Insurance Higher Tuition Student Reading Homeowner and Renter Property Tax Refunds Agricultural Increased benefit for joint filers who take the standard deduction. Increases the credit for 25,000 of 36,000 taxpayers who currently receive it. Federal update to qualifying income. Raised the income limit, and prevented a 5-year limit from being placed on the deduction. Increased annual limit on tax exempt contributions from $500 to $2,000. Now covers secondary education. Extended the benefit of excluding employer provided educational assistance from income. Extended the $10,000 exclusion in adoption assistance from employers for families who adopt. Extended for 1 year the ability to exclude the difference in sale and purchase price as income. Extended the deduction allowing taxpayers to deduct the cost of mortgage insurance on their residence for 2013 taxes. Extended tuition deduction for A new credit, equal to 75% of tutoring expenses for treatment from reading disorders. Refund increased by 3% and Renters Property Tax Refund increased by 6% for 2014 only. Increased credit for property taxes payable in 2014 and forward. All married filers who receive the standard deduction (about 650,000 returns). Working parents who have child care expenses and earn up to $39, ,000 families qualify, with a $400 average benefit. 285,000 taxpayers who paid interest on student loan debt and earn up to $70,000 for single returns or $140,000 for joint returns. Parents saving in an education savings account for secondary or higher education. Taxpayers who receive financial assistance from their employer for undergraduate or graduate education. Taxpayers who earn under $230,000 and received adoption assistance from their employer. Taxpayers who lost their home to foreclosure or had to sell if for less than its purchase price in Taxpayers earning no more than $110,000 and paid mortgage insurance premiums on their 2013 taxes (96,000 returns). Taxpayers who pay higher education tuition and earn no more than $80,000 for single filing or $160,000 for joint filing (40,000 returns). Parents who pay for tutoring for their child with a learning disability. All homeowners and renters who are eligible for a refund. Average refund for renters was $581 in 2013 and $829 for homeowners. Average savings of $115. For tax year 2014 forward. $74 average increase for 25,000 taxpayers. For tax year 2014 forward. Up to $190. For tax year 2013 forward. Up to $100 a year. For tax year 2013 forward. Up to $410 for those who exclude the maximum amount. For tax year 2013 forward. Up to $800 for families. For tax year 2013 forward. Varies from hundreds to thousands of dollars. For tax year 2013 only. Average $40 benefit for 96,000 taxpayers. For tax year 2013 only. Average benefit of $140 for 40,000 taxpayers. For tax year 2013 only. Up to $2,000 or 75% of tutoring expenses. For tax year 2014 only. Refund will increase by an average $25 for homeowners and $35 for renters. For property taxes payable in 2014 only. 94,000 agricultural homesteads. In 2014 up to an additional $205. Moving forward the maximum will increase to $490.

2 Businesses Business Sales Tax Simplification Business Income Tax Simplification Qualifying threshold for businesses that pay June sales tax in advance raised from $120,000 to $250,000. Required pre-payment lowered from 90% to 81.4% of June liability. Minnesota matched the federal tax code to cut taxes and simplify filing so that businesses will not have to keep two sets of tax records. 5,000 businesses that pay their June sales tax in advance. 2,500 businesses will no longer have to pay in advance, and the other 2,500 will pay less up front. 5,000-8,000 affected businesses. Income tax cuts and simpler filing for businesses. Investing in Innovation and Jobs Business-to- Business Sales Tax Repeals Increased funding for the Angel Investment Tax and made changes to the program so Greater Minnesota can take better advantage of it. Minnesota repealed all three business-to-business sales taxes passed in 2013 New or startup businesses in Minnesota. Businesses that were paying the telecommunications or commercial equipment repair tax, as well as businesses that were going to pay the yet to take effect Warehousing tax. Invests additional $3 million for FY 14-15, and $30 million for FY Saves businesses the sales tax on these purchases (6.875% state plus any local taxes that would apply). Capital Equipment Upfront Exemption The effective date of the set to take place capital equipment exemption was moved from September 1, 2014 to July 1, Businesses purchasing capital equipment. Qualifying businesses will no longer have to file for refunds on capital equipment purchases, instead they will save that money at purchase.

3 Student Loan Interest Raised the income limit, and prevented a 5-year limit from being placed on the deduction. 285,000 taxpayers who paid interest on student loan debt and earn up to $70,000 for single returns or $140,000 for joint returns. Up to $190. For tax year 2013 forward. Employer Assistance Extended the benefit of excluding employer provided educational assistance from income. Taxpayers who receive financial assistance from their employer for undergraduate or graduate education. Up to $410 for those who exclude the maximum amount. For tax year 2013 forward. Savings Accounts Increased annual limit on tax exempt contributions from $500 to $2,000. Now covers secondary education. Parents saving in an education savings account for secondary or higher education. Up to $100 a year. For tax year 2013 forward. Higher Tuition Extended tuition deduction for Taxpayers who pay higher education tuition and earn no more than $80,000 for single filing or $160,000 for joint filing (40,000 returns). Average benefit of $140 for 40,000 taxpayers. For tax year 2013 only. for Educator Expenses Extended the deduction of up to $250 for 2013 taxes. 56,000 teachers who had expenses for school materials like books, supplies, or computer equipment. Average benefit of $20 for 56,000 teachers. For tax year 2013 only. Student Reading A new credit, equal to 75% of tutoring expenses for treatment from reading disorders. Parents who pay for tutoring for their child with a learning disability. Up to $2,000 or 75% of tutoring expenses. For tax year 2014 only.

4 Farmers Agricultural An increased credit for property taxes payable in 2014 and forward. 94,000 agricultural homesteads. In 2014 up to an additional $205. Moving forward the maximum will increase to $490. Farm Equipment Repair Minnesota Gift Tax Repealed the sales tax on commercial equipment repair passed in Retroactively repealed the state gift tax passed in Farmers purchasing equipment. Those giving over $1 million in gifts that the tax was originally placed upon before repeal. Eliminates sales tax on qualifying goods and services (6.875% state plus any local taxes that would apply). Effective April 1, No taxpayers will have to pay state gift tax. Effective retroactively. Estate Tax Raised the Estate Tax Exemption from $1 million to $2 million and eliminated the rate bubble. Decedents with estates greater than $1 million in value. By 2018 estates worth under $2 million will no longer have to pay the estate tax.

5 Homeowners and Renters Renters Property Tax Refund Increase A 6% increase to the renters refund for 2014 only. 350,000 renters who already receive the refund. Average benefit increases from $581 to $616. For 2013 returns only. Refund Increase A 3% increase to the homeowners refund for 2014 only. 500,000 homeowners who already receive the refund. Average benefit increases from $829 to $853. For taxes payable in 2014 only. Disabled Veteran Extension Allows the spouse of a veteran with a total disability to continue receiving their property tax benefits for 8 years, up from a previous 5 years. About 400 spouses of veterans with a total disability, or surviving spouses of veterans killed in action. Extends benefits of reduced property tax for another 3 years. Mortgage Insurance Extended the deduction allowing taxpayers to deduct the cost of mortgage insurance on their residence for 2013 taxes. Taxpayer is earning no more than $110,000 and paid mortgage insurance premiums on their 2013 taxes (96,000 returns). Average $40 benefit for 96,000 taxpayers. For tax year 2013 only. Mortgage Debt Forgiveness Extended for 1 year the ability to exclude the difference in sale and purchase price as income. Taxpayers who lost their home to foreclosure or had to sell if for less than its purchase price in Varies from hundreds to thousands of dollars. For tax year 2013 only.

6 Veterans Military Pay Subtraction for Active Guard Reserve Extends military pay subtraction to National Guard members in Active Guard/Reserve status. About 1,000 National Guard members in Active Guard/Reserve status. Reduces their income tax by about $3,000 on average. For tax year 2014 forward. Disabled Veteran Extension Allows the spouse of a veteran with a total disability to continue receiving their property tax benefits for 8 years, up from a previous 5 years. About 400 spouses of veterans with a total disability, or surviving spouses of veterans killed in action. Extends benefits of reduced property tax for another 3 years.

7 Local Governments Sales Tax Exemption Granted all special districts, instrumentalities, joint powers and entities, sales tax exemptions effective January 1, Provides a definitive list of taxable goods and services special districts, instrumentalities, joint powers and entities. Eliminates sales tax paid to local governments on qualifying goods and services (6.875% state plus any local taxes that would apply). For tax year 2016 forward. Local Government Aid Increases Local Government Aid for cities beginning in 2015 by $7.8 million. Local governments that receive city LGA. $15.6 million total in additional funding for local governments in FY

8 Charitable Giving Tax Free IRA Distributions Extended provision that allows the transfer of funds from an IRA to qualified charities without counting the money transferred as income. Those over 70.5 who have money in a traditional IRA or Roth IRA who are transferring those funds to a charity. Ranges from hundreds to thousands of dollars. For tax year 2013 only. Relief to Organizations Helping Schools Increases the sales tax exemption threshold for non-profits that raise money for schools or senior clubs from $10,000 to $20,000. Non-profit school or senior organizations. Up to $690. For tax year 2015 forward. Minnesota Gift Tax Retroactively repealed the state gift tax passed in Those giving over $1 million in gifts that the tax was originally placed upon before repeal. No taxpayers will have to pay state gift tax. Effective retroactively. Nonprofit Snowmobile Clubs Exempts snowmobile clubs from sales tax on purchases of equipment used to groom state trails. 180 nonprofit snowmobile clubs. Eliminates sales tax on qualifying equipment (6.875% state plus any local taxes that would apply). Effective July 1, 2014.

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