Minnesota House Bill HF173

Minnesota 2025-2026 Regular Session

• Introduced: 2/10/25
• Refer: 2/10/25

Caption

Income and corporate franchise tax; research credit modified.

Summary

HF173 would change Minnesota’s individual income tax subtraction for Social Security benefits by allowing taxpayers to subtract the full amount of taxable Social Security benefits received, rather than using the current simplified and alternate subtraction formulas with income-based phaseouts and caps. The bill rewrites Minnesota Statutes section 290.0132, subdivision 26, to make Social Security benefits received a subtraction from taxable income and removes the existing maximum subtraction limits and related phaseout calculations for most taxpayers. The bill applies beginning with taxable years after December 31, 2024. It would therefore reduce taxable income for many retirees and other taxpayers receiving Social Security benefits, potentially lowering state income tax liability for those taxpayers. The measure also retains references to the commissioner’s annual inflation adjustments for threshold amounts, but the practical effect of the bill is to eliminate the current benefit cap structure and allow an unlimited subtraction for taxable Social Security benefits.

Impact

HF173 would amend Minnesota’s individual income tax law in section 290.0132, subdivision 26, by replacing the current Social Security subtraction framework with an unlimited subtraction for taxable Social Security benefits. This would broaden the subtraction available to taxpayers receiving Social Security and likely reduce state income tax revenue, especially among middle- and higher-income retirees who currently face phaseouts or caps. The change would take effect for taxable years beginning after December 31, 2024, affecting future returns rather than prior tax years.

Sentiment

Based on the available record, the bill appears to be presented as a tax relief measure for Social Security recipients, with no recorded committee debate or votes in the provided materials. The absence of opposition statements or recorded roll calls suggests there is not enough context to identify a formal partisan split, but the bill’s structure indicates a favorable policy posture toward retirees and taxpayers living on Social Security income.

Contention

The main policy issue raised by the bill is whether Minnesota should fully exempt Social Security benefits from state income tax or continue limiting the subtraction based on income. Supporters would likely emphasize tax relief for retirees and simplification of the tax code, while potential critics could focus on the revenue loss and the fact that an unlimited subtraction would extend the tax break to higher-income beneficiaries as well as lower-income retirees. No specific objections or amendments are shown in the provided committee or vote history.