According to the Minnesota website, Active Duty military pay can be subtracted on the Minnesota return.
How do I claim the subtraction as a Minnesota Resident?
If you are a resident of Minnesota, you can make the subtraction by following the steps listed below within the program
- State Section
- Minnesota Resident Return
- Subtractions From Income
- Active Duty Military Pay
- Enter the federally taxable Active Duty Military Pay performed outside of Minnesota while a Minnesota resident
- Enter the amount of military pay in the appropriate box
- Continue
What if I am a nonresident?
If you are a nonresident of Minnesota, your military income should not be included on the nonresident return. If your W-2 has Minnesota listed in Box 15, the military pay will be pulled to the nonresident return. You should get a corrected W-2 from the military with your Home of Record listed in Box 15.
What if my spouse and I have different residency?
If one spouse is a resident and the other is not, you are still required to file a joint Minnesota return if you filed a joint Federal tax return. If you filed separately on the Federal tax return you should file separate Minnesota returns.
Can I subtract military retirement income?
Beginning in 2016, you may be able to deduct certain military retirement pay. In order to qualify for the subtraction, your retirement pay must be taxable on the federal return and:
- was for active duty service
- was for service in the reserves
- was a survivor benefit payment plan
To claim the subtraction, follow these steps in the program:
- State Section
- Minnesota Resident Return
- Subtractions From Income
- Military Pension or Other Retirement Military Pay
- Enter the amount that was taxable on the Federal return
- Continue
What other benefits are available to service members?
Credit for Past Military Service:
If you are a veteran of the US military, you may qualify for a nonrefundable credit up to $750 on your resident return. To qualify, one of the following must apply:
- you served in the military for at least 20 years
- You have a service-connected disability rating of 100% total and permanent
- You were honorably discharged and receive a pension or retirement pay.
**You cannot claim this credit if you claim the subtraction for military retirement pay.