Minnesota Tax Guide

Minnesota State Tax: Overview

Minnesota has a progressive tax system, and has enacted recent policy changes that benefit low- to moderate-income households.

Under a progressive tax policy, low-income families are taxed at a lower rate than higher-income households.

Nationally, only six states plus the District of Columbia reserve the lowest overall tax rates for low-income taxpayers. Minnesota’s tiered income tax rates, and tax structure reduces inequality across some groups, according to the Institute on Taxation and Economic Policy (ITEP).

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

In recent years, the Gopher State has enacted higher taxes on wealthy residents and corporations, and has provided more tax credits to low-income households.

For example, the state of Minnesota child tax credit is the largest in the country. At the same time, the state has one of the highest capital gains tax rates in the nation and is the only one that imposes a surtax on long-term capital gain income and other net investment income for high earners.

Here’s more of what you need to know about taxes in Minnesota.

[Data for this state tax guide was gathered from several sources including the U.S. Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]

Minnesota income tax

Minnesota's income taxes are relatively high, and the state only has four income tax brackets, meaning some taxpayers with lower incomes could pay the same tax rate as those earning significantly more.

For example, a single filer with $32,000 of taxable income pays the same tax rate as a single filer with $95,000 of taxable income.

Minnesota income taxes in retirement: Minnesota is one of the states that still tax Social Security. Private and government pension plans are taxable, but Minnesota offers an income tax subtraction for military pensions. Railroad Retirement benefits are tax-exempt in Minnesota.

Minnesota 2024 Income Tax Range: Single filers

Minnesota 2024 Income Tax Range: Married filing separately

Minnesota 2024 Income Tax Range: Married filing jointly

Minnesota 2024 Income Tax Range: Head of household

If you want to plan ahead your taxes, Minnesota's income tax brackets for 2025 have been released. Good news, the range is slightly higher.

Minnesota 2025 Income Tax Range: Single filers

Minnesota 2025 Income Tax Range: Married filing separately

Minnesota 2025 Income Tax Range: Married filing jointly

Minnesota 2025 Income Tax Range: Head of household

Minnesota sales tax

The state sales tax rate in Minnesota is 6.875%, but localities can add as much as 3% on top of the state's rate, according to the Tax Foundation. While Minnesota's sales tax rate is higher than most other states, many necessities are tax-exempt.

• Groceries are tax-exempt.
• Diapers and many feminine hygiene products are tax-exempt.
• Prescription drugs are tax-exempt.

How much are property taxes in Minnesota?

In Minnesota, the average effective property tax rate is 1.05%, and the median property tax bill is $3,000.

Minnesota Property Tax Breaks for Retirees

Property Tax Deferral Program: This program allows people age 65 or older, whose household income is $96,000 or less, to defer a portion of the property tax on their home. Here's how it works:

• The homeowner pays 3% of the household's prior year income.
• The state pays the amount over 3% (deferred tax), which becomes a loan.
• Homeowners will have a lien attached to their property.
• The loan will accrue interest but will not exceed 5%.

(Note: Homeowners may need to meet other criteria to qualify.)

Also, starting January 1, 2025, the maximum homestead property exclusion in Minnesota will increase by $7,600 to $38,000. It applies to homesteads valued at $95,000 or less; the exclusion is 40% of the property's market value.

Minnesota gas tax

In Minnesota, the price per gallon of gasoline includes the state gas tax of 31.8 cents per gallon and the federal gasoline tax of 18.4 cents per gallon.

For diesel, commuters pay a state gas tax of 31.8 cents per gallon, plus the federal gasoline tax of 24.4 cents per gallon. According to the Minnesota Constitution, revenue from state fuel tax is used only for roads and bridges.

Minnesota taxes on alcohol and tobacco

Minnesota estate and inheritance taxes

Minnesota doesn’t have an inheritance tax. However, it does have estate taxes. There is an estate tax exemption of $3 million ($6 million for a married couple), and tax rates range from 13% to 16%.

Related Content

• Minnesota Child Tax Credit: How Much Will You Get?
• IRS Will Tax Your ‘Walz Check’ Minnesota Rebate: What to Know
• Minnesota Rebate Checks and Child Tax Credit