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Minnesota's Elderly Exclusion

What is the elderly exclusion and who can claim it?

Minnesota's elderly exclusion allows low-income taxpayers who are over age 65 or disabled to exclude a certain amount of income, regardless of the source, from taxable income.

How is the exclusion calculated?

The exclusion is calculated using a base amount and an income-based phase-out. Tax-exempt Social Security, railroad retirement, and nontaxable veterans' pension benefits are subtracted from the base amount. The base amount is $12,000 for married joint taxpayers, and $9,600 for single filers. After subtracting tax-exempt Social Security and railroad retirement benefits, the exclusion is phased out at a 50 percent rate for taxpayers with incomes over a fixed threshold.

The following table summarizes the base amounts, the phaseout thresholds, and the maximum incomes at which filers are eligible for the exclusion.

Filers Income
Base amount Phaseout Threshold Maximum Income Eligible
Married joint, both over 65 or disabled $12,000 $18,000 $42,000
Married joint, one over 65 or disabled $12,000 $14,500 $38,500
Married separate $6,000 $9,000 $21,000
Single, head of household, and qualifying widow/widower $9,600 $14,500 $33,700

How much does the elderly exclusion cost the state?

The Minnesota Department of Revenue's Tax Expenditure Budget for 2016-2019 shows an estimated cost of $0.7 million in foregone tax revenues in fiscal year 2016 for the elderly exclusion.

July 2016