Limited individual income tax subtraction permitted for income received from a retirement savings plan.
Summary
HF316 would create a new individual income tax subtraction in Minnesota for income received from a retirement savings plan. The subtraction applies to retirement distributions from a broad range of employer-sponsored and related retirement arrangements, including 401(a), 403(a), 403(b), 457(b), SEP, SIMPLE, automatic enrollment payroll deduction IRAs, and multiemployer pension plans. The bill sets the subtraction at up to $12,000 for married joint filers and surviving spouses, and up to $6,000 for all other filers.
The benefit is phased down for higher-income taxpayers: the maximum subtraction is reduced by 20 percent of adjusted gross income above $32,000. The subtraction is also unavailable to taxpayers who claim certain other subtractions under Minnesota Statutes section 290.0132, subdivisions 5, 21, or 34. The commissioner of revenue would be required to annually adjust the subtraction limits and income threshold for inflation, with taxable year 2025 serving as the statutory year, and the provision would take effect for tax years beginning after December 31, 2024.
Impact
This bill would amend Minnesota Statutes section 290.0132 by adding a new retirement income subtraction to the state individual income tax code. It would reduce taxable income for eligible retirees and other recipients of retirement-plan distributions, thereby lowering state income tax liability for some taxpayers. The measure would also expand the list of retirement plans recognized for the subtraction and require annual inflation indexing of the dollar limits and income phaseout threshold.
Sentiment
The available record shows no committee transcript or recorded vote, so there is no documented debate or formal sentiment from legislative proceedings. Based on the bill’s structure, it appears designed as a tax relief measure for retirement income recipients, suggesting a generally favorable policy intent toward retirees and savers. However, because no hearing discussion is provided, there is no evidence of support, opposition, or amendment activity in the materials supplied.
Contention
No specific points of contention are documented in the provided materials. Potential areas of debate, based on the bill text, could include the revenue impact of creating a new subtraction, whether the income phaseout is set at an appropriate level, and whether the bill should exclude taxpayers already claiming other retirement-related subtractions. Another possible issue is the breadth of eligible plans and whether the subtraction should be limited more narrowly to traditional retirement distributions.