Minnesota Child Tax Credit

Quick Facts

• Benefit type: Refundable credit on the Minnesota income tax return that provides cash back per qualifying child.
• Maximum amount: Up to $1,750 per qualifying child with no overall cap on the number of children.
• Who qualifies: Minnesota residents who have dependent children with valid Social Security numbers or ITINs, meet residency rules, and fall within income thresholds.
• When received: As part of the Minnesota income tax refund, often delivered in spring or summer via direct deposit or check.
• Key advantage: Refundable credit—families receive the full amount even if they owe no Minnesota tax.

Program Overview

The Minnesota Child Tax Credit (MN CTC) launched in 2023 for tax year 2023, offering one of the most generous state-level child tax credits in the country. It aims to reduce child poverty by providing a predictable cash payment to families raising children. Unlike the federal Child Tax Credit, which phases in with earned income, the Minnesota credit is fully refundable and begins phasing out at higher incomes, ensuring low-income families receive the maximum benefit.

The credit complements the state’s Working Family Credit (Minnesota’s EITC). Families can claim both credits, significantly boosting annual refunds. The Department of Revenue estimates that over 300,000 households qualify. Claiming requires filing the Minnesota income tax return (Form M1) and completing Schedule M1C, even if your income is below the federal filing threshold.

Eligibility Requirements

To qualify you must:

1. File as a Minnesota resident or part-year resident: You must file Form M1 for the tax year. Full-year residents claim the credit for children who resided in Minnesota more than half the year. Part-year residents may claim the credit for months the child lived in Minnesota.
2. Have a qualifying child: The child must be under age 18 at the end of the tax year, possess a Social Security number or ITIN, and meet relationship and residency tests (son, daughter, stepchild, foster child, brother, sister, or a descendant). Children claimed by another taxpayer cannot be claimed on your return.
3. Meet income limits: The credit phases out beginning at $35,000 adjusted gross income (AGI) for single filers and $45,000 for married filing jointly. The credit fully phases out at $90,750 for joint filers with one child, with higher limits for larger families. Income includes wages, self-employment, unemployment, and other taxable income.
4. Provide valid identification: Each qualifying child must have a valid Social Security number or ITIN issued before the filing deadline. If a child’s SSN is pending, request an extension until the number is issued.
5. Not be claimed by someone else: Only one taxpayer can claim the child. If there is a dispute, the IRS tie-breaker rules apply, and the Department of Revenue may follow suit.

Special Rules

• Shared custody: Parents who alternate claiming a child must agree who claims the credit for Minnesota purposes. The credit cannot be split between parents.
• Non-U.S. citizens: ITIN filers may claim the credit if the child has an ITIN or SSN and the family meets residency and income requirements.
• Stillbirths: Children born alive at any time during the year who died shortly after birth may qualify if they had a Social Security number.

Credit Calculation

• Base amount: $1,750 per qualifying child.
• Phase-out: For every $4 of income above the threshold, the credit is reduced by $1. The thresholds differ by filing status and number of children. For example, a married couple with two children sees the phase-out begin at $55,000.
• Coordination with Working Family Credit: Claiming both requires completing the relevant schedules. The credits do not reduce each other but both use income from Form M1.
• Advance payments: Currently, Minnesota does not offer advance monthly payments. All funds are received after filing taxes.

Application Process

1. Collect documentation: Gather Social Security cards or ITIN letters for all children, birth certificates, proof of residency (school or medical records), and income documents.
2. Prepare federal return: Complete your federal Form 1040 first; Minnesota uses federal AGI as the starting point.
3. Complete Minnesota Form M1: Enter income, adjustments, and credits. Attach Schedule M1C for the Child Tax Credit. Tax software typically prompts you for the necessary information; paper filers must manually complete the schedule.
4. Attach proof if requested: While not required upfront, keep documentation because the Department may request proof of residency or relationship.
5. File by April 15: Submit electronically or by mail. E-filing speeds processing and refunds. If you need more time, request an automatic six-month extension by paying any expected tax due.
6. Receive refund: Refunds are issued via direct deposit or check. Track your refund status through the Department’s online tool.

Required Documentation Checklist

• Social Security cards or ITIN documentation for each child and parent.
• Proof of residency (school records, medical records, child care statements showing Minnesota address).
• Birth certificates, adoption papers, or custody agreements establishing relationship.
• Income documents: W-2s, 1099s, unemployment statements, self-employment records.
• If separated or divorced, copies of legal agreements detailing custody arrangements.

Deadlines and Timing

• Regular filing deadline: April 15 following the tax year. When April 15 falls on a weekend or holiday, the deadline shifts to the next business day.
• Extended claims: You have 3.5 years from the original due date to file for a refund. For tax year 2024, claims must be made by October 15, 2028.
• Processing time: Electronic returns with direct deposit are often processed within two to four weeks. Paper returns may take up to 12 weeks.
• Amended returns: If you discover you missed the credit, file Form M1X (Amended Minnesota Income Tax Return) with an updated Schedule M1C within 3.5 years.

Interaction with Other Programs

• Working Family Credit: Claim both to maximize benefits. The Working Family Credit is based on earned income, while the Child Tax Credit is per child.
• SNAP/MFIP: Refunds are not counted as income for SNAP or Minnesota Family Investment Program purposes, though unspent refunds may count as assets after 12 months.
• Child Care Assistance Program: The credit does not reduce eligibility. Families often use the refund to cover copays or deposits.
• Federal taxes: The state credit does not affect federal liability and is not taxable income.

Maximizing Your Credit

1. File even with low income: Many families with little or no tax liability miss the credit because they assume filing isn’t required. File Form M1 to receive the refund.
2. Keep residency records: Minnesota may request proof that children lived with you. Maintain school enrollment letters, medical visits, or child care statements.
3. Coordinate with co-parents: Decide early who will claim the child. If both parents claim the same child, the credit is delayed while the Department resolves the conflict.
4. Use tax software or free filing assistance: Free File programs and VITA sites know how to claim the credit. They can also help ITIN filers ensure forms are accurate.
5. Plan for phase-outs: If your income is near the phase-out threshold, consider timing bonuses or retirement contributions to remain eligible for the full credit.

Common Mistakes to Avoid

• Missing Schedule M1C: Some taxpayers file Form M1 but forget to attach the schedule, resulting in no credit. Double-check before submitting.
• Incorrect child information: Ensure names and SSNs match SSA records. Typos cause processing delays.
• Claiming ineligible dependents: If a child lived with another parent more than half the year, you may be ineligible. Confirm residency timelines.
• Not updating addresses: Refund checks mailed to old addresses can take months to reroute. Update with the Department if you move.
• Ignoring requests for documentation: Respond quickly to letters seeking proof. Failure to respond may result in denial and recapture of the credit.

Example Scenarios

• Family of four: The Johnsons earn $42,000 and have two children under 6. They receive $3,500 from the Child Tax Credit plus $1,800 from the Working Family Credit, which they use for emergency savings and child care costs.
• Single parent with one child: Maya earns $28,000 as a nursing assistant. She receives the full $1,750, which helps pay for rent and utilities during the winter.
• ITIN filer household: The Hernandez family files with ITINs and has three children with SSNs. Despite modest earnings of $32,000, they receive $5,250, enabling them to catch up on medical bills and save for school supplies.

Frequently Asked Questions

• Can I claim the credit if my child was born in December? Yes, if the child was born alive during the year and lived with you, even for a short time.
• What if my child has an ITIN but no SSN? Children with ITINs are eligible. Provide the ITIN documentation with your return.
• Do foster children qualify? Yes, if they lived with you more than half the year and you have a placement letter or documentation from the child welfare agency.
• How does shared custody affect the credit? Only the custodial parent (who the child lived with more than half the year) can claim the credit unless a written agreement transfers the claim.
• Is the credit protected from garnishment? The Department can offset refunds for state debts (taxes, student loans) and child support. Federal debts do not affect the state credit.

Additional Resources

• Minnesota Child Tax Credit information
• Schedule M1C instructions
• Where’s My Refund? tool
• Prepare + Prosper free tax clinics
• IRS Child Tax Credit guidance