Minnesota does not have an inheritance tax
Minnesota has no state inheritance tax. You will not owe Minnesota state tax on money or property you inherit, regardless of the amount or your relationship to the person who died. This applies whether you inherit from a Minnesota resident or someone who lived elsewhere.
The federal government does have an estate tax, but it only applies to very large estates. For 2024, the federal threshold is $13.61 million per person—meaning only estates larger than that amount owe federal tax. Most Minnesota residents will never encounter it.
Some states do tax inheritances or estates, but Minnesota is not one of them. If you inherit property located in another state, you may owe tax to that state, but Minnesota itself will not tax your inheritance.
Key Takeaways
- Minnesota has no state inheritance tax, so you owe nothing to Minnesota on money or property you inherit.
- The federal estate tax only applies to estates over $13.61 million in 2024, which affects very few people.
- If you inherit property in a state that does tax inheritances, you may owe tax to that state, not Minnesota.
- Inherited retirement accounts like IRAs and 401(k)s have their own federal tax rules that are separate from inheritance tax.
- A will or trust can affect how much federal tax an estate owes, but Minnesota itself collects no inheritance tax regardless.
How federal estate tax differs from inheritance tax
Federal estate tax and inheritance tax are different things, and the distinction matters. Estate tax is paid by the person's estate before money is distributed to heirs. Inheritance tax is paid by the person who receives the inheritance. Minnesota has neither, but some states have one or the other.
The federal estate tax applies only to estates exceeding the threshold—$13.61 million in 2024. That threshold changes each year and is set by federal law, not by Minnesota. The executor of the estate (the person managing it) handles federal estate tax, not the heirs.
Even if an estate owes federal tax, the heirs themselves do not owe Minnesota tax on what they receive. The distinction is important because it means your inheritance is not taxed in Minnesota under any circumstance.
Which states do have inheritance taxes
Twelve states currently have inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and six others. These states tax the person who inherits, not the estate itself. The tax rate and exemptions vary by state and often depend on your relationship to the person who died.
If you inherit property located in one of these states, you may owe that state's inheritance tax even if you live in Minnesota. For example, if you inherit real estate in Iowa, you would owe Iowa inheritance tax on that property. The tax is based on where the property is located, not where you live.
Minnesota residents who inherit from someone in another state should check whether that state has an inheritance tax. Your inheritance from a Minnesota resident, however, will never be subject to Minnesota tax.
Inherited retirement accounts and their tax rules
Inherited retirement accounts like IRAs, 401(k)s, and 403(b)s have their own federal tax rules that are separate from inheritance tax. When you inherit a retirement account, you do not owe inheritance tax in Minnesota, but you will owe federal income tax on the money when you withdraw it.
The rules for inherited retirement accounts changed significantly in 2023 under the find 2.0 Act. Most non-spouse heirs must now withdraw the entire account within 10 years, though the timing of withdrawals is flexible. Each withdrawal is taxed as ordinary income at your federal tax rate.
Spouses who inherit retirement accounts have different options—they can roll the account into their own IRA or treat it as their own account. This is a more favorable treatment than non-spouse heirs receive. Minnesota does not tax these withdrawals, but the federal government does.
What happens if you inherit real estate in Minnesota
If you inherit real estate in Minnesota, you will not owe Minnesota inheritance tax. However, you may owe property tax on the property going forward, and you will need to transfer the title into your name through the probate process or through a trust.
The transfer itself does not trigger Minnesota tax. You will need to file a deed with the county recorder's office in the county where the property is located. Some counties charge a transfer fee, but this is not a tax—it is a recording fee, usually under $100.
If you later sell the inherited property, you may owe federal capital gains tax on the increase in value since the person died. Minnesota does not have a capital gains tax, so you would owe nothing to Minnesota on the sale itself. The federal tax applies only to the gain, not to the full sale price.
Probate and estate settlement in Minnesota
When someone dies in Minnesota, their estate usually goes through probate—a court process that validates the will, identifies heirs, and distributes property. Probate costs money for court fees, attorney fees, and executor fees, but these are not taxes. Minnesota does not charge a probate tax.
The executor (or personal representative) is responsible for paying any debts, taxes, and expenses before distributing the remaining estate to heirs. If the estate owes federal estate tax because it exceeds $13.61 million, the executor pays that from the estate. Heirs receive what is left after all obligations are met.
Probate can take several months to over a year depending on the size and complexity of the estate. During this time, the executor manages the property and pays bills. Once probate closes, heirs receive their inheritance with no Minnesota tax owed on it.
How to plan your estate to minimize federal tax
If your estate is large enough that federal estate tax might explore, you can use legal strategies to reduce the tax burden. These strategies include setting up trusts, making gifts during your lifetime, and using the annual gift tax exclusion. For 2024, you can give up to $18,000 per person per year without triggering gift tax.
A living trust can help your estate avoid probate and may reduce federal tax exposure, though it does not eliminate it for very large estates. A may have access to estate planning attorney can review your situation and recommend strategies based on your specific assets and goals.
Minnesota does not tax these planning strategies, so you are free to use them without worrying about state tax consequences. Your only concern is federal tax, and only if your estate exceeds the federal threshold.
Frequently Asked Questions
Do I owe Minnesota tax if I inherit money from someone who lived in Minnesota?
No. Minnesota has no inheritance tax, so you owe nothing to Minnesota regardless of how much you inherit or who it came from. The only tax that might explore is federal estate tax, and only if the entire estate exceeds $13.61 million in 2024.
What if I inherit property in another state that has an inheritance tax?
You would owe that state's inheritance tax on the property you inherit there. The tax is based on where the property is located, not where you live. You should contact that state's tax department or an attorney in that state to understand the rules and file any required forms.
Is there a Minnesota tax on inherited retirement accounts?
Minnesota does not tax inherited retirement accounts. However, you will owe federal income tax on withdrawals you make from the account. The amount you owe depends on your federal tax bracket and how much you withdraw each year.
Do I have to pay tax when I inherit a house in Minnesota?
You do not owe Minnesota inheritance tax on the house. You will owe property tax on it going forward as the owner. If you later sell it, you may owe federal capital gains tax on the increase in value since the person died, but Minnesota has no capital gains tax.
What is the difference between estate tax and inheritance tax?
Estate tax is paid by the estate before heirs receive anything. Inheritance tax is paid by the person who inherits. Minnesota has neither. The federal government has an estate tax, but it only applies to estates over $13.61 million in 2024.