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Minnesota allows a nonrefundable credit for past military service and an income tax subtraction for military retirement pay. Individuals who are eligible for both the credit and the subtraction may claim one or the other, but not both.
Minnesota allows subtraction from federal taxable income of most other types of military pay that are taxed at the federal level. Beginning in tax year 2016, Minnesota also allows an income tax subtraction for military retirement pay, including survivor benefit plan payments.
Please use the Defense Manpower Data Center's (DMDC) Military Verification service to verify if someone is in the military. The website will tell you if the person is currently serving in the military. The site is available 24-hours a day.
Income received by Minnesota residents for military service under U.S. Code, title 10, including service in AGR status by members of the military reserves other than the National Guard, and service by Minnesota residents in other states' National Guards, is not taxed by the state of Minnesota, and thus is not subject ...
That's because California is the only U.S. state that fully taxes military pensions. (The District of Columbia does as well.)
Minnesota taxes pension income, whether derived from governmental or private pensions, on the same basis as wages, interest, dividends, and other income, but Minnesota allows an income tax subtraction for military retirement pay, including pensions paid to survivors of military retirees.
You can file online or complete and mail Form M99, Credit for Military Service in a Combat Zone, for the year you served. You file Form M99 separately from your income tax return. To receive this credit, you must: Include required documentation (see ?Documentation Needed? on this page) with your form.
California is one of three states in the nation that fully taxes veterans pensions.