HF355

Purpose

This bill changes Minnesota law to provide a larger tax credit for long-term care insurance premiums paid by residents. It aims to encourage people to purchase long-term care insurance by offering a bigger reduction in taxes owed.

Main Provisions

• Credit source and amount:

  • Taxpayers receive a credit against their Minnesota income tax for long-term care insurance policy premiums paid during the tax year.
  • The credit equals 25% of premiums paid, and only the portion not deducted when calculating taxable net income is eligible.

• Per-policy and per-beneficiary limits:

  • A taxpayer may claim a credit for only one policy for each qualified beneficiary.
  • The maximum credit per qualified beneficiary is $100,250.

• Annual credit limits by filing status:

  • For married couples filing jointly, the maximum total credit for the year is $200,500.
  • For all other filers (e.g., single, head of household), the maximum total credit is $100,250.

• Allocation for nonresidents:

  • For a nonresident or part-year resident, the credit is allocated based on the percentage described in Minnesota Statutes (section 290.06, subdivision 2c, paragraph e).

Significant Changes to Existing Law

• Increases the maximum long-term care insurance credit available to eligible taxpayers and specifies per-beneficiary and per-filing-status caps.
• Maintains the 25% credit rate and the rule that only premiums not deducted in determining taxable net income count toward the credit.
• Adds explicit guidance on how the credit is allocated for nonresidents or part-year residents.

Practical Impact

• Taxpayers who pay for long-term care insurance premiums may receive a larger credit against their Minnesota income tax than under prior law.
• Individuals must be mindful of the per-beneficiary and total annual caps when planning to claim the credit.
• Nonresidents or part-year residents will have their credit allocation determined using a specific apportionment method.

Additional Details

• The credit remains a credit against tax owed (not a deduction from income).
• The policy and beneficiary rules remain, with the new maximums applying per beneficiary and per filing status.

Relevant Terms

• long-term care insurance premium
• credit against the tax
• 25 percent credit rate
• not deducted in determining taxable net income
• one policy per qualified beneficiary
• maximum per qualified beneficiary: $100,250
• maximum total credit for married couples filing jointly: $200,500
• maximum total credit for all other filers: $100,250
• nonresident or part-year resident
• allocation based on percentage (section 290.06 subdivision 2c paragraph e)