Tax filing season is almost here, and Minnesota lawmakers are racing to apply some changes to save many taxpayers some money.
One of the last things Congress did at the end of the year was pass a series of tax breaks. The goal at the Minnesota Legislature is to make our state tax code mirror the federal code. If it does, it adds up to about $19-million in savings for Minnesota taxpayers.
It's called tax conformity.
For school teachers, it means they will be able to deduct up to $250 from their federal taxes for personal money they spent last year on supplies for their classrooms. Two identical bills in the House and Senate would allow for the same deduction in Minnesota.
In addition to the classroom supplies deduction, there's a $4,000 deduction for qualified college tuition, and an itemized deduction for mortgage insurance premiums.
But it's more than use tax deductions. It also applies to people who short-sold a home in 2014 -- when a home is written off and sold for less than the mortgage.
For instance, if you still owed $120,000 on your mortgage and the bank allowed you to short sell it for $70,000, the $50,000 loss was actually considered a gain for the homeowner and therefore taxable income. Not anymore.
Minnesota lawmakers hope to have all the changes passed in time for taxpayers to file their returns later this month.
"We are very optimistic that this is going to happen very quickly and we already working with tax preparers and the software vendors that many Minnesotans use to prepare their taxes," said Revenue Commissioner Cynthia Bauerly. "So, everyone is poised and ready to make this change as soon as it happens in state law."
This measure is fully expected to pass next week. When it does, make sure your tax prep software is up to date with all of the tax code changes before you begin filling out the forms.