Rebate checks, Social Security income tax cuts plus new taxes and fees: How will bills at State Capitol impact your budget?

ST. PAUL, Minn. -- The Minnesota Legislature adjourned for the 2023 session Monday night, sending the $72 billion, two-year state budget to Gov. Tim Walz's desk for signature.

It includes direct rebate checks, tax relief for seniors on Social Security, and a new tax credit that Democrats say will make a huge dent in child poverty.

But scattered through the state's spending plan are new revenue-raisers like increased sales taxes and other fees. Here's a breakdown of who might see money back- -- and when Minnesotans might pay more.  

Rebate checks

The rebates are $260 per tax filer, $520 for married couples filing jointly plus an additional $260 per dependent, up to three. A family of five could see up to $1,300 back in their pockets.

Married couples filing jointly making under $150,000 per year and other tax filers making under $75,000 per year and are eligible for the one-time money back. It's a cliff, meaning there is no phase-out if income exceeds those thresholds. 

Democrats leading the legislature have sought to target their tax relief to lower- and middle-income Minnesotans. 

"During the pandemic, it was very, very difficult for many people and many people fell far behind. Other people did quite well. A lot of people who were able to work from home actually saved money," said House Speaker Melissa Hortman, DFL-Brooklyn Park. "So the way we looked at returning the surplus in the form of rebates was that it should be means-tested so that the people who need the money get it."

The Minnesota Department of Revenue estimates 2.5 million households will qualify based on 2021 tax returns, which are the data used to determine eligibility. Minnesotans can expect to see those payments starting this fall.

They will receive it via direct deposit if they provided banking information when they filed their taxes last year or if they updated information using an online portal that will be operational this summer, according to the department.

Otherwise, a check will be mailed to the address listed on their 2021 tax return.

Child tax credit

What they're calling the "centerpiece" of their tax bill is a child tax credit for low-income families that researchers at Columbia University predict will slash child poverty in Minnesota by one-third.

The credit is $1,750 per child and it starts to phase out for families making more than $35,000 per year. If Minnesotans make more than that, they might be eligible for a smaller credit depending on their income and how many children they have.

The Department of Revenue estimates 265,000 families will be impacted by this change, and the credit will be available after they file their income tax return next year. 

Social Security tax cuts

Last year, leaders in the divided legislature came to an agreement to fully eliminate the state's tax on Social Security. But that deal unraveled before the session ended, punting the issue to this year.

Democrats in total control this year ultimately decided to do a partial repeal instead, which will eliminate the tax for couples earning up to $100,000 and $78,000 for individuals. Right now, half of seniors in the state already don't pay state taxes on those benefits. Leaders say the change will increase that total to 76%.

Gas tax and new delivery fee

A transportation spending package for the next two years will raise the gas tax in future years by indexing it to the inflationary index for construction costs. Any increase is capped at 3% and it will amount to a five-cent increase over the next four years, according to nonpartisan legislative staff. The current rate is 28.5 cents.

The last time the legislature passed a bill to raise the gas tax, which is constitutionally required to fund roads and bridges, was in 2008. Supporters say current revenues are not keeping pace to meet the needs of transportation infrastructure in disrepair. 

That same budget agreement also includes a 50-cent delivery fee that consumers will have to pay on most orders over $100 as an additional stream of money. 

There are exemptions on the fee, like groceries, food deliveries from restaurants, pharmaceutical drugs and baby products. Clothing, though exempt from general sales taxes, would be subject to the delivery fee. 

Sales tax increase in Twin Cities metro, other fees

The sales tax in the seven-county Twin Cities metro will increase by 1%. A housing package raises the rate by 0.25% with revenues dedicated towards affordable housing and rental assistance, and the transportation package raises it by 0.75% to support transit in the region. 

The change means Minnesotans will pay an additional $1 for every $100 purchase.

There are also changes that will increase car tab fees. In the environmental and natural resources budget, boating license fees will also go up -- whether it's a 40-foot watercraft or a sailboat.

In many cases, those costs will double. For a canoe, kayak, sailboard, paddleboard and paddle boats, registration fees will increase from $10.50 to $23, for example.

Other cost savings for families: free tuition, universal school meals. 

Earlier in the session, lawmakers approved a plan to provide free breakfast and lunch for all students in school, regardless of their parent's income. 

Schools must enroll in the federal program for free and reduced-priced meals to be eligible. The state would pick up the tab for the cost of covering everyone else who doesn't qualify for the federal program, which is estimated to be a $388 million line item in the next two-year budget.

That will save all families money. For example, If a family had two children enrolled at Apple Valley High School, who bought lunch every day, the change could save them more than $100 per month. 

For students whose families make less than $80,000 a year, they would be eligible for the "North Star Promise" scholarships under a new program passed this year.

Starting next school year, that funding will cover tuition and fees for residents who attend two- or four-year programs in the University of Minnesota or Minnesota State systems or at in-state tribal colleges.

The Minnesota Office of Higher Education estimates it will impact 15,000 to 20,000 students currently enrolled.

The amount awarded to a qualifying student would be determined after other grants, scholarships and financial aid are deducted from the student's total costs to attend. Private school tuition is not covered.