nonbusiness losses or deductions, personal exemptions, and NOLs from previous years. IRS and Minnesota Department of Revenue rules control how you carry NOLs forward. • Partnership A partnership cannot take an NOL itself. Losses pass through to each partner, who calculates an individual NOL using rules similar to those for sole proprietors. • C Corporation C corporations can deduct NOLs on their return; unlike individuals, corporations have different rules about which deductions count, and Minnesota never allows a carryback— NOLs are carried forward up to 15 years. NOLs stay with the corporation and are not passed to shareholders. Minnesota rules must be followed even if they are different from federal rules. • S Corporation S corporations do not take an NOL at the entity level—losses pass through to shareholders, who can use their share to figure an individual NOL. Minnesota-Specific Adjustments and Expensing Limits (2025) For 2025, Minnesota conforms with or provides its own limits on many federal deductions, often requiring adjustments for Section 179 expensing, bonus depreciation, and some meals deductions (see 2025 Schedule M2SBNC, Federal Adjustments or state instructions for up-to-date caps and details). Section 179 expensing limits in 2025 are set at $2.5 million, with a deduction phase-out starting at $4 million (federal law; check Minnesota conformity for your filing year). Action Steps: • Keep clear records to prove you are running your business for profit (sales, advertising, business plans, separate business bank accounts, etc.). • Track all eligible start-up costs. If over $5,000, plan to amortize the rest. • Always check the latest IRS and Minnesota Department of Revenue instructions for current deduction limits and required state adjustments (like Section 179 and bonus depreciation). • For NOLs, use the correct Minnesota rules for carryforward periods and percentages— different from federal law. • If you’re unsure about your situation, especially with NOLs, amortization, or how to handle start-up vs. capital costs, check with a tax advisor or the Minnesota Department of Revenue for detailed help.
Estimated Tax Payments Sole Proprietorship
• You must pay estimated taxes—federal and Minnesota—if you expect to owe $500 or more in Minnesota income tax after subtracting your withholding and refundable credits, or $1,000 or more for federal individual income tax.
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