Unlimited Social Security subtraction provision

A bill for an act

relating to taxation; individual income; providing an unlimited Social Security

subtraction; amending Minnesota Statutes 2025 Supplement, section 290.0132,

subdivision 26.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2025 Supplement, section 290.0132, subdivision 26, is

amended to read:

Subd. 26.

Social Security benefits.

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(a) A taxpayer is allowed a subtraction equal to the

greater of the simplified subtraction allowed under paragraph (b) or the alternate subtraction

determined under paragraph (e).

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(b) A taxpayer's simplified subtraction equals the amount of taxable social security

benefits, as reduced under paragraphs (c) and (d).

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(c) For a taxpayer other than a married taxpayer filing a separate return with adjusted

gross income above the phaseout threshold, the simplified subtraction is reduced by ten

percent for each $4,000 of adjusted gross income, or fraction thereof, in excess of the

phaseout threshold. The phaseout threshold equals:

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(1) $100,000 for a married taxpayer filing a joint return or surviving spouse;

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(2) $78,000 for a single or head of household taxpayer; and

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(3) for a married taxpayer filing a separate return, half the amount for a married taxpayer

filing a joint return.

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(d) For a married taxpayer filing a separate return, the simplified subtraction is reduced

by ten percent for each $2,000 of adjusted gross income, or fraction thereof, in excess of

the phaseout threshold.

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(e) A taxpayer's alternate subtraction equals the lesser of taxable Social Security benefits

or a maximum subtraction subject to the limits under paragraphs (f), (g), and (h).

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(f) For married taxpayers filing a joint return and surviving spouses, the maximum

subtraction under paragraph (e) equals $5,840. The maximum subtraction is reduced by 20

percent of provisional income over $88,630. In no case is the subtraction less than zero.

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(g) For single or head-of-household taxpayers, the maximum subtraction under paragraph

(e) equals $4,560. The maximum subtraction is reduced by 20 percent of provisional income

over $69,250. In no case is the subtraction less than zero.

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(h) For married taxpayers filing separate returns, the maximum subtraction under

paragraph (e) equals one-half the maximum subtraction for joint returns under paragraph

(f). The maximum subtraction is reduced by 20 percent of provisional income over one-half

the threshold amount specified in paragraph (d). In no case is the subtraction less than zero.

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(i) For purposes of this subdivision, "provisional income" means modified adjusted gross

income as defined in section 86(b)(2) of the Internal Revenue Code, plus one-half of the

taxable Social Security benefits received during the taxable year, and "Social Security

benefits" has the meaning given in section 86(d)(1) of the Internal Revenue Code.

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(j) The commissioner shall adjust the phaseout threshold amounts in paragraph (c),

clauses (1) and (2), as provided in section
270C.22
. The statutory year is taxable year 2023.

The maximum subtraction and threshold amounts as adjusted must be rounded to the nearest

$10 amount. If the amount ends in $5, the amount is rounded up to the nearest $10 amount.

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(a) The amount of Social Security benefits received is a subtraction.

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(b) For the purposes of this section, "Social Security benefits" has the meaning given in

section 86(d)(1) of the Internal Revenue Code.

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EFFECTIVE DATE.

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This section is effective for taxable years beginning after December

31, 2025.

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