Individual states administer assistance programs for low-income individuals and families. In Minnesota, one such program is the General Assistance program. Although a recipient of cash assistance may be required to file both federal and state income tax returns, the amount received as benefits under the General Assistance program is not taxed. The benefits may, however, be considered income for purposes of income tax credits.
General Assistance
The General Assistance program in Minnesota is an assistance program for single adults and married couples without children who do not qualify for the Temporary Assistance for Needy Families program. The General Assistance program provides a small monetary benefit each month to eligible individuals or couples with very little, or no, income and resources. As of July 2011, the maximum monthly benefit was $203 for an individual and $260 for a couple.
Federal Taxes
Each year, taxpayers in the United States must pay federal income taxes on income, both earned and, in some cases, unearned. The Internal Revenue Service has an exhaustive list of what is considered income for purposes of taxpayer obligations. Welfare benefits are not included in the IRS definition of income and are, therefore, not taxable. Minnesota General Assistance benefits are a welfare benefit and as such are not taxed.
Exception to General Rule
Although the IRS does not consider welfare benefits to be income for purposes of individual income tax obligations, there is one exception to the general rule. If the welfare benefits were gained through fraudulent means then the amount received is taxable. An example of fraudulent means might be if the recipient was also receiving cash assistance benefits in another state.
Minnesota State Taxes
Minnesota state tax begins with the adjusted gross income amount from your federal tax return and then adds or subtracts sums. The Minnesota individual tax return does not require you to add any money received as General Assistance benefits, and therefore the benefits are not taxed. The amount you receive in General Assistance benefits, however, is included as income for purposes of determining income tax credits such as the Minnesota child and dependent care credit.
