Tax in Minnesota: a complete guide
Minnesota has many unique state tax regulations you’ll need to understand, from income tax to sales tax to property taxes. Here’s our breakdown of how Minnesota’s taxes might affect you.
Minnesota income tax
All US residents and citizens are legally obligated to pay federal income tax. But on top of federal regulations, many states impose their own income taxes on residents to raise revenue for local services.
Minnesota has its own income tax, and there are just four income tax brackets, with the highest earners paying an income tax rate of 9.85 percent. Here, we look at how Minnesota’s income tax brackets apply to different filers – and remember, these only apply to taxable income, not gross income.
| Scenario | Taxable income | State income tax amount |
|---|---|---|
| Single filer | $0–$28,080 | 5.35 percent |
| $28,080–$92,230 | 6.80 percent | |
| $92,230–$171,220 | 7.85 percent | |
| $171,220+ | 9.85 percent | |
| Married person, filing separately | $0–$20,525 | 5.35 percent |
| $20,525–$81,530 | 6.80 percent | |
| $81,530–$142,405 | 7.85 percent | |
| $142,405+ | 9.85 percent | |
| Married person, filing jointly | $0–$41,050 | 5.35 percent |
| $41,050–$163,060 | 6.80 percent | |
| $163,060–$284,810 | 7.85 percent | |
| $284,810+ | 9.85 percent | |
| Head of household | $0–$34,570 | 5.35 percent |
| $34,570–$138,890 | 6.80 percent | |
| $138,890–$227,600 | 7.85 percent | |
| $227,600+ | 9.85 percent |
Just like federal taxes, there are deductions available for state income taxes.
Minnesota offers taxpayers standard deductions as follows:
$12,900 for single filers
$25,800 for married couples filing jointly
$12,525 each for married people filing separately
$18,800 for heads of households
Many tax credits are also on offer to help Minnesotan families lower their tax bills. Some of the most common credits are:
Working Family credit (available to families who are also eligible for federal earned income tax credit)
Dependent care credit (helps offset the cost of care for dependents)
K-12 Education credit (allows taxpayers with children at school to deduct some expenses)
Minnesota sales tax
Minnesota also levies a state sales tax on many goods and services.
The statewide sales tax in Minnesota is 6.875 percent, but many counties and cities add their own fees on top of that, sometimes adding more than two percent to the sales tax rate. That means sales taxes are more than 7.5 percent in many parts of the state.
Local authorities can impose even higher sales taxes. For example, in the lively entertainment center of downtown Minneapolis, restaurants and entertainment businesses have a three percent surtax. So, a big night out in Minneapolis can cost a premium.
Some goods are exempt from the state sales tax, including grocery items (but not prepared food) and clothing (but not “clothing accessories”). Businesses need a license to sell alcohol, which is also taxed at 6.875 percent. A gross receipts tax of 2.5 percent also applies to liquor sales in Minnesota.
Minnesota property tax
Minnesota property taxes are decided and collected at a county level. This means property taxes in Minnesota vary hugely across the state’s 87 counties.
The state’s average property tax rate is 1.02 percent; that’s ever-so-slightly higher than the US average of 0.99 percent. Minnesota’s average property tax in dollars is $2,915.
Minnesotan property taxes can be as low as 0.6 percent (in Aitkin County) and rise to 1.34 percent (in Olmsted County – the highest in the state).
Minnesota motor tax
Minnesota’s sales tax of 6.875 percent applies to the purchase of motor vehicles, too.
The statewide gas tax in Minnesota is the same for gasoline and diesel; both are taxed at 28.5 cents per gallon.
Minnesota estate tax
Only 12 states in the US currently have an estate tax, and Minnesota is one of them.
Minnesota’s estate tax threshold is much lower than the federal estate tax. Federal estate tax starts at estates of over $12 million, whereas Minnesota’s estate tax applies to taxable estates with a value of $3 million or more.
Let’s look at the different estate tax brackets for Minnesota’s estate tax.
Minnesota retirement tax
Bad news for retirees: Minnesota taxes income from retirement savings the same as other types of income.
This means the tax burden in Minnesota can be higher for seniors than in other states where more generous deductions are offered to retirees.
Any retirement income included as part of your Adjusted Gross Income (AGI) – including Social Security – is taxed as regular income in Minnesota.
Over 65 are entitled to some deductions. Single filers can deduct up to $9,600 of retirement income, which goes up to $12,000 for married filers – as long as your overall taxable income is below $33,700 and $42,000, respectively. You are not eligible for this deduction if you earn more than $33,700 (single filer) or $42,000 (joint filer).
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.