NIIT: Net Investment Income Tax (2025)
Minnesota · Minnesota DOR · Used for tax years 2025
Minnesota Schedule NIIT calculates net investment income and any Minnesota net investment income tax for individuals, estates, and trusts. It uses amounts from federal Form 8960, applies Minnesota adjustments, and is included with Form M1 or Form M2.
Who files this form
You must complete 2025 Schedule NIIT if you are an individual, estate, or trust taxpayer with more than $1,000,000 of investment income. The schedule determines whether you owe Minnesota net investment income tax. The tax does not apply to corporate taxpayers.
- Partners and shareholders who elect composite income tax or pass-through entity (PTE) tax must still file Schedule NIIT with Form M1 if their investment income exceeds $1 million.
- Nonresident aliens who are not subject to federal net investment income tax may still be subject to Minnesota's tax. Complete a pro-forma federal Form 8960 and include it with Schedule NIIT.
What you'll need
Have these forms and details available, as applicable:
- Federal Form 8960: Schedule NIIT uses total investment income from line 8 and deductions and modifications from line 11.
- Taxpayer identification: Your name, FEIN, SSN, or ITIN, and Minnesota Tax ID.
- Form M1 or Form M2: Schedule NIIT is included with your individual or estate and trust return.
- Class 2a property information: Use the property tax statement for the year of disposition or contact the county assessor to identify the property's classification. Flow-through information appears on Schedules KPI and KS, lines 21 and 22; Schedule KPC, lines 23 and 24; or Schedule KF, lines 31 and 32.
- U.S. bond income information: Flow-through information appears on Schedules KPI and KS, line 14; Schedule KPC, line 17; or Schedule KF, line 16.
- Minnesota allocation calculations: Include an attachment showing the calculation for line 13 or line 21, as applicable.
- Estate or trust distribution details: Line 17 asks for the amount of Minnesota net investment income distributed to beneficiaries or charities.
How to file
Include Schedule NIIT as a supplemental schedule with Form M1 or Form M2.
- Complete Part 1 to calculate Minnesota net investment income.
- If you are an individual filing Form M1, complete Part 2, not Part 3. The specific line 15 directions say to report the tax on Form M1, line 14a. The general “How to File” paragraph instead refers to line 14.
- If you are an estate or trust filing Form M2, complete Part 3, not Part 2. Report the tax from Schedule NIIT, line 23, on Form M2, line 12.
Do not include Schedule NIIT with Form M3 or Form M8. Minnesota NIIT cannot be reported or paid through a composite income tax or PTE tax election.
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Counting deductions twice: Reduce line 6 by deductions already used in the line 3 calculation.
- Including ineligible bond income on line 3: Do not include interest or dividends attributable to Ginnie Mae, Fannie Mae, or Freddie Mac bonds. Reduce eligible income by related investment interest and other expenses deducted on federal Form 8960, line 11.
- Exceeding the line limits: Neither line 2 nor line 3 can exceed line 1. Line 7 cannot exceed either line 2 or line 6.
- Continuing when no tax is due: If line 11 or line 19 is zero or less, stop. You are not subject to Minnesota net investment income tax.
- Leaving out allocation details: Attach the calculation for line 13 or line 21 and carry the allocation ratio on line 14 or line 22 to five decimal places.
- Overlooking estimated payments: If you expect to owe Minnesota NIIT, adjust your income tax withholding or estimated payments to account for the increase and avoid underpayment penalties.
Questions people ask
Does completing Schedule NIIT always mean I owe tax?
No. The schedule determines whether tax is due. Individuals stop if line 11 is zero or less. Estates and trusts stop if line 19 is zero or less.
What tax rate does the schedule use?
The rate is 1%. For individuals, the schedule subtracts $1,000,000 from Minnesota net investment income before applying the rate and Minnesota allocation ratio. For estates and trusts, it subtracts $1,000,000 from undistributed Minnesota net investment income before applying the rate and allocation ratio.
Can gains from agricultural property be excluded?
Minnesota net investment income excludes net gains from dispositions of qualifying class 2a property. Line 2 covers qualifying gains from property located in Minnesota that are included in federal Form 8960, line 8. For property with multiple classifications, only the acreage attributable to class 2a may be excluded if the county assessor can practically separate it.
How do individuals determine the Minnesota allocation?
Minnesota residents allocate 100% of income to Minnesota. Part-year residents and nonresidents use the guidance for Schedule M1NR, lines 1 through 8, to determine the amount allocated to Minnesota. Include an attachment showing the line 13 calculation.