MN Property tax refund

[Beth]

Is a MN property tax refund reportable income?

I think not whether one itemized or not, but would appreciate a confirmation.

[Bees Knees]

It depends.

A 2008 M1PR refund (which is based on RE taxes payable in 2009) which is received in 2009 reduces the RE tax deduction on the 2009 federal Schedule A.

An M1PR refund which is based on RE taxes payable in a prior year that is received in 2009 is reported as income on line 21 of the 2009 Form 1040, IF the taxpayer deducted RE taxes on the federal Schedule A for the year in which the M1PR applies.

An M1PR refund received by a taxpayer who takes the standard deduction on the federal return does not report any of it as income, even if the taxpayer increased the standard deduction by RE taxes paid.

See Recoveries, page 3-21 in TTB for the rules.

[Beth]

Thank you for clairifying this -- I do appreciate it!

[Davc]

An M1PR refund received by a taxpayer who takes the standard deduction on the federal return does not report any of it as income, even if the taxpayer increased the standard deduction by RE taxes paid.

That may not always be true. If the additional standard deduction is less than the amount paid in the prior year minus the refund then a portion is taxable. Example:

Single person pays 800 in 2008 and increses the standard deduction by 500. In 2009 they receive a 400 refund. 800-400=400 so 100 of the refund is taxable.

(Paraphrased from Pub 525, page 22.)