Minnesota unveils tax breaks for retired veterans

(KMSP) - So far, the Department of Revenue says about 2 million Minnesotans have already filed their returns. But, there's some confusion about brand new benefits for retired veterans. There are about 19,000 of them in the state, and these changes could not only save them money, but it's aimed at encouraging more career veterans to live here.

Until this year, Minnesota considered military pensions taxable income. That is no longer happening. A new tax break signed by Governor Dayton allows veterans to subtract their military retirement pay from their taxable income. But, top veterans leaders fear not enough of them know about it.

"Ironically, there are still a lot of people out there that haven't heard the news, and haven't heard of this benefit," said General Larry Shellito, a Veterans Affairs commissioner.

For years, Minnesota has been an island on taxing military retirement benefits. Wisconsin and Iowa exempt them, and South Dakota has no income tax. Veterans say that's left little to no incentive to retire in Minnesota.

"All the veterans groups and the legion and the military officer's association, they all have magazines.  And the magazines, they have a matrix, a table. And the table shows where to retire… what are the different features and all this stuff, and Minnesota has always been very bad for people financially," said Mike Rivard, a Navy veteran. 

But, advocates say this is more than a tax break - it's an investment in Minnesota's work force.

"You talk to businesses and corporations and they want leadership experience, leading other troops. They also have their benefit to Minnesota bringing millions of dollars coming into this state," said Bob Dettmer, Veterans Affairs chair.

Overall the Department of Revenue says about 1.3 million Minnesotans have already received refunds. If you have yet to file your taxes, the department has a list of tax software programs.