• Minnesota provides tax credit for both long-time past military service and recent active combat service.Minnestoa state contour against blurred USA flag image by Stasys Eidiejus from Fotolia.com
  
  The state of Minnesota offers two tax credits for United States military veterans: one for "past service," the other for recent past service in an active combat zone or in a hazardous duty area. In order to apply for both of these tax credits, veterans must contact the Minnesota Department of Revenue.
  
  

Requirements for the Past Service Credit

• According to the Minnesota House of Representatives web site, in order to qualify for the "past service" tax credit, veterans must fulfill one of two conditions. Veterans must either have served in the United States military (which includes the National Guard and the Army Reserves) for at least 20 years or must have a service-related disability which the United States Department of Veterans Affairs judges to be "100 percent total and permanent."
  
  

Income Restrictions for the Past Service Credit

• The "past service" tax credit applies to veterans who have a federal adjusted gross income (FAGI) of at least $23,370 per year. For veterans with FAGI over $30,000 per year, the tax credit phases out as income increases, until at $37,500 individuals are no longer eligible.
  
  

Past Service Credit Amount

• The tax credit for past service equals $750 in non-refundable credit. Non-refundable tax credit differs from income tax subtractions because non-refundable credits directly reduce tax liability while income tax subtractions reduce taxable income, which indirectly reduces tax liability. Both accomplish the same goal, tax-wise, but in different ways. The non-refundable past-service tax credit of $750 is equal to $14,020 in direct income tax subtraction.
  
  

Service Requirements for the Combat Duty Credit

• This tax credit requires "Military Service in a Combat Zone," according to the Minnesota Department of Veteran Affairs. To qualify for this, veterans must have served in either an active combat zone or a "qualified hazardous duty area" anytime after September 11, 2001.
  
  

Additional Requirements for the Combat Duty Credit

• The "Military Service in a Combat Zone" tax credit also requires that the veteran's pay be qualified as combat pay and that the veteran's home during his or her months of service was Minnesota. To determine what kinds of pay qualify as combat pay, consult Internal Revenue Code Section 112 for detailed requirements.
  
  

Combat Duty Credit Amount

• According to the Minnesota Department of Revenue, the active combat duty credit awards $59 per month served in a qualified duty zone before 2009, or $120 per month served in a qualified duty zone in 2009.
  
  

Limitations on these Tax Credits

• The tax credit for past service was signed into law in 2008 and is not expected to expire. The tax credit for recent active combat duty, however, is set to expire on October 15, 2010.
  
  

Applying for These Credits

• The non-refundable credit for past service is awarded if the FAGI on your submitted tax information is within the eligible range. To apply for the active combat duty tax credit, fill out form M99 on the Minnesota Department of Revenue web site.