Blog: Maximizing Tax Season: Navigating Minnesota Tax Credits for Your Benefit

Tax Credits as an Anti-Poverty Measure in America:

Tax season often brings a mix of anticipation and anxiety to many Americans. It’s a time when individuals and families must understand and comply with complex tax regulations, hoping for minimal liabilities when filing. This extra burden makes life more challenging to navigate, especially for individuals struggling to get by. Fortunately, federal and state tax credits are designed to relieve and support low-income individuals and families.

Tax credits are active anti-poverty measures created by the government to reduce the financial weight within low-income households. More than 1/3 of all public support comes from tax provisions, so this support becomes critical to many.

“Tax credits can also impact poverty and improve family economic security and mobility through a range of broader mechanisms. Housing tax credits can help reduce the rent burden and improve secure and affordable accommodation for families. Education tax credits can lessen the costs of higher education and expand access,” Center on Poverty and Social Policy.

Federal tax credits such as the Earned Income Tax Credit and the Child Tax Credit are a part of the American Rescue Plan to reduce childhood poverty by 40%. Like the Minnesota State tax credits, these cash refunds allow individuals and families to allocate the funds to the most impactful part of their lives. Tax credits give families and individuals the opportunity for personalized assistance based on the specific and unique circumstances tax filers may be facing. Tax credits cast a large net over many communities facing poverty, which helps create an equitable approach to alleviating the burden of financial instability.

Navigating the Minnesota Tax Credit Landscape:

While tax season brings its share of complexities, Minnesota residents can claim several state tax credits and refunds in addition to any federal credits. These state tax credits are designed to provide much-needed relief and support to families and individuals struggling. Understanding and leveraging these benefits can turn tax season from a time of worrying to a time of well-being.

Working Family Credit & Child Tax Credit: A Lifeline for Families:

Understanding the Child Tax Credit

The Child Tax Credit is a helpful credit families can claim for every child under 18, and there is no limit to how many children can be claimed. Filers can receive up to $1,750 per child. However, this credit begins to phase out with individuals with incomes exceeding $29,500 (if you are married and filing jointly, this threshold is $35,000). This is a refundable credit, meaning you can receive a refund even if you do not owe any taxes.

For a more comprehensive look at how to qualify and claim this credit, please visit the Minnesota Department of Revenue website for more information.

Understanding the Working Family Credit 

The Working Family Credit is a refundable tax credit that offers additional relief to individuals and families under a certain annual income level. The refundable credit is determined based on income, residency, and the number of dependents. This credit is very similar to the federal Earned Income Tax Credit. Complete the Schedule M1CWFC, Minnesota Child and Working Family Credits forms to see if you qualify.

Families facing financial challenges often compromise and stretch already thin budgets to provide for their children. The Minnesota Child Tax Credit and Working Family Credit provide crucial resources to those families and work toward alleviating some financial burdens. By offering substantial tax relief, these credits are intended to empower families to invest in their children’s well-being.

Exploring the K-12 Education Credits:

In addition to the Working Family and Child Tax credits, the  Minnesota Department of Revenue offers two valuable tax benefits for parents to prioritize their children’s education: the K-12 Education Credit and Subtraction.

Understanding the K-12 Education Subtraction

Families with school-aged children can access deductions and credits to ease the costs of a child’s education. The K-12 Subtraction allows families to subtract qualifying expenses of up to $1,625 (K-6th grade) or $2,500 (7-12th grade). Unlike the Working Family Credit, there is no income limit for filers. To receive this credit, all receipts or documentation of the purchases made during the tax year are necessary.

Understanding the K-12 Education Credit 

The K-12 Education Credit permits the subtraction of 75% of qualifying expenses and is subjected to annual income limits based on the number of children. To receive this credit, all receipts or documentation of the purchases made during the tax year are necessary. For more information on how to qualify, fill out the Schedule M1ED, K-12 Education Credit form.

Additionally, it is critical to understand that you can only choose one of the two educational reliefs. Deciding which one to utilize is important to maximize your tax benefits. Property Tax Refund Benefits: Relief for Renters: 

Understanding the Minnesota Renter’s Property Tax Refund

If you are renting in Minnesota, you may qualify for a Renter’s Property Tax refund depending on your income and rent paid. A portion of the rent you pay goes towards paying property taxes for the building you live in. The Renter’s Property Tax Refund offers much-needed relief from the burdens of property taxes. To be eligible for this refund, households must have incomes of $73,270 or less during 2023 and must submit the Certificate of Rent Paid (CRP) provided by the landlord when filing taxes. Legally, the landlord is obligated to provide a completed copy of the past year’s CRP by January 31st. If you did not receive a CRP or have a CRP with inaccurate information, contact your landlord first to address the issue. If the landlord does not provide you with a corrected, completed copy by March 1st, you may request a Rent Paid Affidavit from the Minnesota Department of Revenue.

The help provided by the Renter’s Property Tax Refund allows families to focus resources on their essential needs of food, housing, transportation, education, etc. For more information on qualifying for a refund, visit the Minnesota Department of Revenue website here.

Accessing Valuable Resources and Building Financial Resilience:

Understanding and leveraging tax credits and refunds can profoundly impact financial well-being. Whether you are a working family, a parent with school-aged children, or a renter, these benefits offer tangible support and relief during an otherwise very stressful financial season. You can optimize your tax strategy by familiarizing yourself with available credits, maintaining accurate documentation, and utilizing resources provided by the Department of Revenue.

The State of Minnesota Department of Revenue provides valuable information and support to assist taxpayers in navigating benefits. Their website offers informative videos and flyers on tax information to taxpayers. From educational videos to practical social media outreach, these resources empower individuals and families to maximize their tax savings and secure their financial future. Visit the Minnesota Department of Revenue website to learn more.