Yes, Minnesota has a state income tax

Minnesota charges a state income tax on wages, self-employment income, investment gains, and other earnings. Unlike some states that have no income tax at all, Minnesota residents and anyone earning money within the state must pay this tax in addition to federal income tax. The state uses the money to fund schools, roads, healthcare programs, and other services.

The tax rate depends on how much you earn. Minnesota has four tax brackets that range from 5.35% to 9.85% of your income. A higher income puts you in a higher bracket, but only the portion of income in that bracket is taxed at that rate — the rest is taxed at the lower rates below it.

Key Takeaways

  • Minnesota taxes income at rates between 5.35% and 9.85%, with four separate tax brackets based on earnings.
  • You owe state income tax on wages, self-employment income, retirement distributions, and investment gains earned in Minnesota or by Minnesota residents.
  • The state allows deductions and credits that can lower your tax bill, including the standard deduction and credits for dependents or education expenses.
  • You file Minnesota taxes using Form M1 along with your federal return, usually by April 15 each year.

The four Minnesota tax brackets and rates

Minnesota divides taxable income into four brackets. For the 2024 tax year, a single filer pays 5.35% on the first portion of income, then 6.80% on the next portion, then 7.85%, and finally 9.85% on the highest portion. The exact dollar amounts where each bracket begins change slightly each year to account for inflation.

Married couples filing jointly have higher income thresholds before moving to the next bracket, which means more of their income is taxed at the lower rates. Head of household filers (usually single parents) have thresholds between single and married amounts. The Minnesota Department of Revenue publishes the exact bracket amounts each January on its website.

Because Minnesota uses a progressive tax system, your overall tax rate is lower than the highest bracket you reach. For example, if you are single and earn $75,000, you do not pay 7.85% on all of it — you pay 5.35% on the first chunk, 6.80% on the next chunk, and 7.85% only on the portion above a certain threshold.

What income is subject to Minnesota state tax

Minnesota taxes most types of income. This includes wages from a job, self-employment income if you run a business, tips, rental income, and capital gains from selling stocks or property. It also includes distributions from retirement accounts like IRAs and 401(k)s, though some retirement income may be partially exempt depending on your age and total income.

If you are a Minnesota resident, you owe tax on income earned anywhere — even if you work in another state or country. If you are not a resident but earned money in Minnesota, you owe tax on that Minnesota income only. The state defines residency based on where you live for most of the year and where you maintain a permanent home.

Some types of income are not taxed. These include certain Social Security benefits (depending on your total income), municipal bond interest, and life insurance proceeds. Gifts and inheritances are also not taxed as income in Minnesota.

Deductions and credits that lower your tax bill

Minnesota allows you to subtract a standard deduction from your income before calculating tax. For 2024, the standard deduction is $12,950 for single filers and $25,900 for married couples filing jointly. If you are 65 or older, the standard deduction is higher. You can also itemize deductions instead if your specific expenses (like mortgage interest or charitable donations) add up to more than the standard amount.

The state also offers tax credits that directly reduce what you owe. These include a dependent exemption credit for each child or dependent, a child and dependent care credit if you pay for childcare, and an education credit if you or your children paid for college tuition or student loan interest. Some credits are refundable, meaning you get money back even if you owe no tax.

Low-income households may may have access to for the Minnesota Working Family Credit, which works similarly to the federal Earned Income Tax Credit. You do not have to itemize to claim most credits — you can use the standard deduction and still claim them.

How to file Minnesota state taxes

You file Minnesota taxes using Form M1, the Minnesota Individual Income Tax Return. This form goes to the Minnesota Department of Revenue and is usually filed at the same time as your federal return, by April 15 each year. If you need more time, you can request an extension, though any taxes owed are still due by April 15 even if your return is not filed yet.

You can file by mail, online through the state's website, or through tax software that supports Minnesota returns. Many tax preparation companies include Minnesota forms in their standard packages. If your income is below a certain threshold and your situation is straightforward, you may be able to file for free through the state's Free File program.

If you are self-employed, you also file Schedule C (federal) and Minnesota Schedule C-1 to report business income and expenses. You will owe self-employment tax to the federal government and state income tax to Minnesota on your net profit.

Tax withholding and estimated payments

If you work for an employer, your employer withholds Minnesota state income tax from your paycheck based on the W-4 form you fill out. The withheld amount is sent to the state on your behalf. If too much is withheld, you get a refund when you file. If too little is withheld, you owe the difference.

If you are self-employed or have income that is not subject to withholding, you may need to make estimated tax payments to Minnesota four times a year. These payments are due in April, June, September, and January. The state provides a worksheet to calculate how much to pay based on your expected income for the year.

You can adjust your withholding at any time by submitting a new W-4 to your employer. If your income changes significantly during the year, updating your withholding can help you avoid a large bill or refund at tax time.

Special situations and exemptions

Military members stationed in Minnesota but not residents of the state do not owe Minnesota income tax on military pay. However, they do owe tax on other income like interest or dividends. Clergy and certain religious workers may have different withholding rules.

Retirees age 55 and older may exclude some or all of their retirement income from taxation, depending on the type of retirement account and their total income. This includes distributions from IRAs, 401(k)s, and pensions. The exclusion phases out as income rises, so higher earners may not may have access to for the full benefit.

If you move to Minnesota from another state, you may owe tax only on income earned after you became a resident. If you move out of Minnesota, you owe tax only on income earned while you were a resident. The state looks at your residency status on December 31 of the tax year to determine whether you file as a resident or nonresident.

Frequently Asked Questions

Do I have to pay Minnesota state tax if I work in another state?

If you are a Minnesota resident, yes — you owe tax on all income, including wages earned in other states. However, you may be able to claim a credit on your Minnesota return for taxes paid to the other state, so you do not pay tax twice on the same income. Check the Minnesota Department of Revenue website for reciprocal tax agreements with neighboring states.

What happens if I do not pay my Minnesota state taxes?

The state charges interest and penalties on unpaid taxes. Interest accrues monthly, and penalties can be 5% to 25% of the unpaid amount depending on how late the payment is. The state can also place a lien on your property, garnish your wages, or offset your federal refund to collect what you owe.

Can I deduct federal taxes paid from my Minnesota state taxes?

No, Minnesota does not allow you to deduct federal income taxes. However, you can deduct state and local property taxes and sales taxes (you choose one) up to $10,000 total on your federal return. This is a federal rule, not a Minnesota one.

Is Social Security taxed in Minnesota?

Social Security benefits are not taxed in Minnesota, regardless of your income level. This is one of the few types of income the state does not tax. However, if you have other income, it counts toward the threshold for federal taxation of Social Security benefits.

What is the important date to file Minnesota taxes?

The standard important date is April 15 of the year following the tax year. If April 15 falls on a weekend or holiday, the important date moves to the next business day. You can request an extension to October 15, but taxes owed are still due by April 15 even if your return is not filed.