Minnesota charges a state income tax on wages, investment income, and business earnings

Minnesota has its own income tax separate from federal tax. The state takes a percentage of your wages, retirement distributions, investment gains, and self-employment income. Unlike some states, Minnesota does not have a flat tax rate — the percentage you pay depends on how much you earn, with higher earners paying a higher rate.

The tax year runs January 1 through December 31, the same as federal tax. You report Minnesota income on your state return, which you file separately from your federal return. If you work in Minnesota or live there, you almost certainly owe state tax on at least some of your income.

Key Takeaways

  • Minnesota uses a progressive tax system where the rate increases as your income rises, ranging from 5.35% to 9.85% depending on your filing status and total income.
  • You must file a Minnesota state return if you earned income in the state or lived there for the full year, even if you owe no tax.
  • The Minnesota Department of Revenue processes returns and handles disputes, and you can file online, by mail, or through a tax preparer.
  • Deductions and credits available on your federal return may differ from those allowed by Minnesota, so your state tax bill does not automatically match your federal one.
  • If your employer withholds too little, you may owe a balance when you file; if too much is withheld, you receive a refund.

Minnesota's tax brackets and rates for 2024

Minnesota divides taxpayers into four filing statuses: single, married filing jointly, married filing separately, and head of household. Each status has its own income brackets and corresponding tax rates. The rates start at 5.35% on the lowest bracket and rise to 9.85% on the highest.

For example, a single filer in 2024 pays 5.35% on income up to roughly $30,000, then 6.80% on income between $30,000 and $80,000, then 7.85% on income between $80,000 and $180,000, and 9.85% on income above $180,000. The exact bracket thresholds change each year. Married couples filing jointly have higher thresholds at each bracket, so they pay the same rate on more income before moving to the next tier.

The brackets adjust annually for inflation. The Minnesota Department of Revenue publishes the current year's brackets on its website before the tax year begins, so you can see exactly where your income falls.

What income is subject to Minnesota tax

Minnesota taxes most forms of income: W-2 wages from an employer, self-employment income, interest and dividends, capital gains, retirement distributions, rental income, and gambling winnings. If you earned it and reported it to the IRS, Minnesota wants its share.

Some income is exempt. Social Security benefits are not taxed by Minnesota, even if they are taxed federally. Military pay for active-duty service members is exempt. Certain retirement income, such as distributions from a military pension or some public employee pensions, may be partially or fully exempt depending on your age and the source of the pension.

If you lived outside Minnesota for part of the year, you may owe tax only on income earned while you were a resident. If you moved to Minnesota mid-year, you file as a part-year resident and report only the income you earned after you arrived. The same applies if you left the state — you report only income earned before you left.

How withholding and estimated payments work

If you receive a W-2 paycheck, your employer withholds Minnesota income tax automatically. You tell your employer how much to withhold by completing a Minnesota W-4 form. If you claim too many exemptions, too little is withheld and you owe money when you file. If you claim too few, too much is withheld and you receive a refund.

If you are self-employed or receive income with no withholding — such as rental income or investment gains — you may need to make estimated tax payments. These are quarterly payments made directly to the Minnesota Department of Revenue. You calculate them based on your expected annual income and pay roughly one-quarter of your estimated tax bill four times per year. If you do not pay enough through withholding and estimated payments, you may owe a penalty when you file, even if you ultimately owe no tax.

You can adjust your withholding at any time by submitting a new W-4 to your employer. If you expect a large refund or a large bill, changing your withholding mid-year can help you break even by year-end.

Deductions and credits that reduce your Minnesota tax

Minnesota allows a standard deduction, similar to federal tax. For 2024, the standard deduction ranges from about $12,000 for a single filer to about $24,000 for a married couple filing jointly. If your total deductions exceed the standard deduction, you can itemize instead — but Minnesota's itemized deductions differ from federal ones, so you may itemize on one return and take the standard deduction on the other.

Minnesota offers tax credits that directly reduce what you owe. The Working Family Household and Dependent Care Credit helps lower-income families pay for childcare. The Property Tax Refund provides money back to renters and homeowners with low to moderate income. The Education Credit covers some tuition and education expenses. These credits are separate from federal credits, so you may may have access to for a federal credit but not a Minnesota one, or vice versa.

Some deductions allowed federally are not allowed in Minnesota. For instance, federal tax paid is deductible on your federal return but not on your Minnesota return. Conversely, Minnesota allows a deduction for certain retirement income that federal tax does not. Always check the Minnesota Department of Revenue instructions for your return type to see which deductions explore.

Filing your Minnesota return

You file your Minnesota return using Form M1, the Minnesota Individual Income Tax Return. You can file online through the Minnesota Department of Revenue website, by mail, or through a tax preparer or software. The filing important date is the same as federal — April 15 of the following year, or the next business day if April 15 falls on a weekend or holiday.

If you need more time, you can request an extension. An extension gives you until October 15 to file, but it does not extend the important date to pay. If you owe tax, you must pay by April 15 even if you file late. Interest and penalties explore to unpaid tax after the important date.

You will need your Social Security number, your spouse's number if filing jointly, dependent information, W-2s or 1099s showing your income, and documentation of any deductions or credits you claim. Keep records for at least three years in case the Minnesota Department of Revenue audits your return.

What happens if you owe or are owed a refund

If you withheld too much tax during the year, you receive a refund. The Minnesota Department of Revenue processes refunds and typically issues them within four to six weeks of receiving your return, though it can take longer during busy filing season. You can choose to receive your refund by direct deposit or check.

If you owe tax, you must pay by the filing important date to avoid penalties and interest. You can pay online through the Minnesota Department of Revenue website, by mail, or through a tax preparer. If you cannot pay in full, you can set up a payment plan with the state. Interest accrues on unpaid tax, and a failure-to-pay penalty applies if you do not pay by the important date.

If you disagree with your tax bill or believe the Minnesota Department of Revenue made an error, you can file a protest or request a hearing. The process begins with a written protest sent to the address on your notice. You have a limited time to protest, so act quickly if you believe there is a mistake.

Frequently Asked Questions

Do I have to file a Minnesota return if I did not earn much income?

You must file if your income exceeds the filing threshold for your status, which is slightly higher than the standard deduction. Even if you earned less than that, filing may be worth it — you might be owed a refund of withheld tax or a refundable credit like the Earned Income Tax Credit.

What if I moved to Minnesota partway through the year?

You file as a part-year resident and report only income earned after you moved to the state. You will need to show when you became a resident, such as with a lease, utility bill, or driver's license. Your employer may need to adjust your withholding once you notify them of the move.

Can I deduct federal income tax paid on my Minnesota return?

No. Minnesota does not allow a deduction for federal income tax, even though the federal return allows a deduction for state and local taxes paid. This is one of the main differences between federal and state returns.

What if I owe both federal and state tax and cannot pay everything?

Contact the Minnesota Department of Revenue to discuss a payment plan. You can also contact the IRS separately about a federal plan. Paying something is better than paying nothing — it reduces the interest and penalties that accrue.

How long do I need to keep my tax records?

Keep records for at least three years from the date you file. If the Minnesota Department of Revenue audits you, it will ask for documentation of income, deductions, and credits. Keeping organized records makes an audit much simpler.