Key Takeaways
- 2025 returns may need review due to retroactive conformity changes.
- Minnesota still decouples from some federal provisions, including bonus depreciation.
- PTET is extended through 2027, giving pass-through entities additional planning opportunities.
The Minnesota Department of Revenue finalized its 2025 income tax forms this week, a good moment to flag something that affects returns whether you have already filed your 2025 return or not. Minnesota’s 2026 omnibus tax bill made several changes that apply retroactively to 2025 returns. If you’ve already filed, some may call for an amended return. If you haven’t yet, they’re worth reviewing first.
The reason a 2026 law touches a 2025 return is conformity. Minnesota only follows the federal Internal Revenue Code (IRC) as it stood on a fixed date, and the legislature just moved that date to the IRC as amended through May 1, 2026, pulling a wave of 2025 federal changes (largely from the One Big Beautiful Bill Act, or OBBBA) into 2025 Minnesota returns, except where the state deliberately decoupled. That “except” is where most of the action is.
What changed for your 2025 return
Bonus depreciation, Minnesota still decouples. OBBBA restored 100% federal bonus depreciation for property acquired after January 19, 2025. Minnesota doesn’t follow it. If you claim it federally, Minnesota generally requires an 80% addback in year one, then a 20% subtraction in each of the next five years, so it’s spread out, not lost. (Minnesota does conform to the new qualified production property election under IRC § 168(n).)
“No tax on tips,” Minnesota follows. OBBBA’s temporary deduction for qualified cash tips (2025–2028) carries through to Minnesota, since the state conformed and didn’t decouple.
Business interest (IRC § 163(j)), Minnesota conforms. OBBBA loosened the federal cap by adding depreciation, amortization, and depletion back into the calculation, generally allowing a larger deduction. Minnesota follows, so revisit your 2025 numbers if the limitation applies.
529 plan credentialing addback, watch this one. OBBBA made 529 plan distributions for certain postsecondary credentialing expenses federally tax-free. Minnesota did not fully follow. If you excluded such a distribution federally, Minnesota generally requires you to add it back.
Corporate research or experimental (R&E) expenses (IRC § 174A). For years beginning after December 31, 2024, affected corporations generally add back 80% of the federal R&E deduction, then subtract a quarter of that addback over the next four years. Don’t assume it flows straight through. Model both sides.
One-time 14.88% Homestead Credit Refund boost. For claims tied to taxes payable in 2026 (the 2025 refund cycle), refunds get a one-time 14.88% increase. Already filed? The Department will adjust automatically. Eligibility generally covers residents with household income under $142,490 who owned and occupied their homestead as of January 2, 2026.
Planning ahead: PTET and 2026+ items
The biggest forward-looking change: Minnesota’s Pass-Through Entity Tax (PTET) is extended through 2027 (it was set to expire after 2025). For partnerships and S corporations, it remains a live SALT cap workaround, now with two more years of runway to plan around.
One timing note for 2026: the state provided estimated-payment relief, so the first estimated payment counts as timely if made with the second (June 15, 2026, for calendar-year filers).
Other provisions, including a 2026 nursing facility wage subtraction, Opportunity Zone changes, and composite return relief, start in 2026 or later and don’t affect 2025.
Quick action checklist
Individuals: Check tips deduction eligibility; flag any 529 plan credentialing distributions for a Minnesota addback; watch for the automatic homestead refund adjustment.
Businesses: Recompute IRC § 163(j); plan for the bonus depreciation addback/subtraction schedule; calculate the R&E addback; model PTET for 2026–2027.
Preparers: Confirm software reflects the May 1, 2026 conformity date and Minnesota’s decoupling; keep a 2025 conformity checklist; evaluate amended returns filed before updates landed.
Because effective dates vary provision by provision, review carefully before you file, amend, or lock in a 2025 position. If you’re unsure how any of this applies to you, our team can help. Reach out to your Boyum Barenscheer advisor.
Frequently Asked Questions
Do I need to amend my 2025 Minnesota tax return?
Possibly. Several provisions apply retroactively to 2025, so taxpayers who already filed should review whether an amendment is needed.
Does Minnesota follow the new federal bonus depreciation rules?
No. Minnesota continues to decouple from federal bonus depreciation and generally requires an 80% addback.
Has Minnesota’s Pass-Through Entity Tax (PTET) been extended?
Yes. The PTET election has been extended through tax year 2027.