Standard and Itemized Deduction Limitation Changesįilers with incomes over $220,650 will generally see fewer tax benefits from the standard or itemized deductions. The effective date is tax year 2023 and later. Taxpayers can continue to claim the state subtraction amounts with a calculation similar to prior law (now known as the "alternative method"), if those amounts are greater than the new “Simplified” approach established in the bill. For married taxpayers filing separately, the phase-out is 10% for each $2,000 of AGI over $50,000. The bill expanded Minnesota’s Social Security subtraction to allow taxpayers to subtract the greater of a new Simplified Method (described below) of calculating the subtraction or Alternative Method (described below), which is similar to the subtraction as it had been calculated under prior law.įor a new “Simplified Method,” taxpayers with adjusted gross income below $100,000 for married joint returns or $78,000 for single or head of household returns are eligible, and the subtraction is phased out by 10% for each $4,000 of adjusted gross income (AGI) in excess of the phase-outs mentioned. Second, an income tax subtraction is provided related to damages received for nonphysical injuries and sicknesses, such as emotional distress, humiliation, and defamation, as a result of an abuse claim. The tax bill included two provisions related to sexual harassment or abuse settlements between an employer and an employee.įirst, when there is a financial settlement provided, the financial settlement cannot be provided as wages or severance pay to the employee regardless of whether the settlement includes a nondisclosure agreement. $78,000 for a single or head of household taxpayer.$100,000 for a married taxpayer filing a joint return or a surviving spouse. The subtraction phases out at these income thresholds, reducing it by 10% for each $2,000 of adjusted gross income exceeding the threshold: $25,000 for a married taxpayer filing a joint return or a surviving spouse.Recipients or survivors may qualify for a subtraction if they earn public pension income based on service and do not receive Social Security benefits on the same income. This bill provides for a subtraction for certain qualified public pension income, effective for tax years 2023 and later. The net investment income tax must also be determined and calculated for an owner's composite income tax election and an entity's pass-through entity tax election. The tax rate is 1% on the net investment income over $1 million. This new tax is imposed on individuals, estates, and trusts with more than $1 million of net investment income in the tax year. It is reduced by certain deductions, like investment interest expenses, investment advisory and brokerage fees, and similar expenses. Net investment income includes but is not limited to interest, dividends, capital gains, rental and royalty income, and other similar income. The bill enacted a new tax on net investment income, starting in tax year 2024. Visit 2023 Federal Conformity for Income Tax for more details. The tax bill updates state tax law conformity to the Internal Revenue Code (through May 1, 2023) and includes the SECURE Act 2.0. Log in to Referring Agencies e-Services.
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