Minnesota charges a state income tax on wages, investments, and other earnings

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

The state uses a progressive tax system, meaning tax rates increase as your income increases. For the 2024 tax year, Minnesota has four tax brackets ranging from 5.35% on the lowest incomes to 9.85% on the highest. You only pay the higher rate on the income that falls into that bracket, not on all your income.

Minnesota residents file a state tax return each year, usually at the same time as their federal return. You report the same income sources to both the state and federal government, though some deductions and credits differ between them.

Key Takeaways

  • Minnesota taxes income at rates between 5.35% and 9.85% depending on how much you earn, with higher rates only on income above certain thresholds.
  • The state taxes wages, self-employment income, investment earnings, and retirement distributions the same way the federal government does.
  • You file a Minnesota state return separate from your federal return, usually in the same filing season.
  • Some income sources, like Social Security benefits and certain retirement accounts, may be partially or fully exempt from Minnesota tax.
  • If your employer withholds too much or too little state tax from your paychecks, you can adjust it using Form MN W-4.

Minnesota's four tax brackets and rates

Minnesota divides taxable income into four brackets. For single filers in 2024, the brackets are: 5.35% on income up to $28,080; 7.05% on income from $28,080 to $73,716; 7.85% on income from $73,716 to $195,311; and 9.85% on income over $195,311. Married couples filing jointly have higher thresholds before moving to the next bracket.

The bracket thresholds adjust each year for inflation, so the dollar amounts change annually. If you earn $50,000 as a single filer, you do not pay 7.05% on all of it — you pay 5.35% on the first $28,080 and 7.05% only on the remaining $21,920.

Minnesota also allows a standard deduction, which reduces the income you actually pay tax on. For 2024, the standard deduction is $12,750 for single filers and $25,500 for married couples filing jointly. If your income is below the standard deduction, you owe no state income tax.

What income Minnesota taxes

Minnesota taxes most types of income the same way: W-2 wages from employment, 1099 self-employment income, interest and dividends, capital gains, rental income, and distributions from retirement accounts like IRAs and 401(k)s. If you receive income from any of these sources, you report it on your Minnesota return.

Some income sources are partially or fully exempt. Social Security benefits are not taxed by Minnesota, even though they may be taxed federally. Military pensions and certain other government pensions also receive special treatment. If you have income from these sources, the rules can be complex — a tax professional or the Minnesota Department of Revenue can clarify your situation.

Income earned outside Minnesota may still be taxable to the state if you are a Minnesota resident. If you work in another state or country, you may owe tax to both Minnesota and that location, though Minnesota offers a credit for taxes paid to other states to avoid double taxation.

How withholding and estimated tax payments work

If you are an employee, your employer withholds state income tax from each paycheck based on the information you provide on Form MN W-4. This form asks about your filing status, number of dependents, and other income sources. The withholding is an estimate — it is meant to cover your annual tax liability so you do not owe a large amount when you file.

If you are self-employed or have significant income not subject to withholding, you may need to make estimated tax payments quarterly. These are payments you make directly to the Minnesota Department of Revenue in March, June, September, and January. If you do not pay enough through withholding and estimated payments, you may owe interest and penalties when you file your return.

You can adjust your withholding at any time by submitting a new Form MN W-4 to your employer. If you had too much withheld in the previous year and received a refund, you might lower your withholding. If you owed money, you might increase it.

Filing your Minnesota state return

Minnesota residents file using Form MN 1040, the state's individual income tax return. You file it with the Minnesota Department of Revenue, not with your employer. The filing important date is the same as the federal important date — typically April 15, though it shifts if that date falls on a weekend or holiday.

You can file on paper by mailing the form to the address listed in the instructions, or you can file electronically through the state's website or using tax software. Many tax preparation programs include Minnesota forms and can file electronically on your behalf. If you cannot file by the important date, you can request an extension, which gives you until October 15 to file.

When you file, you report your income, claim deductions and credits, and calculate how much tax you owe or how much you overpaid through withholding. If you overpaid, the state refunds the difference. If you underpaid, you owe the balance by the filing important date.

Minnesota tax credits and deductions

Minnesota offers several credits and deductions that can lower your tax bill. The state allows a standard deduction (described above) or an itemized deduction if you have significant expenses like mortgage interest or charitable donations. You choose whichever is larger.

Tax credits directly reduce the amount of tax you owe. Minnesota offers credits for dependent children, education expenses, property taxes or rent paid, and low-income workers. Some credits are refundable, meaning you receive money back even if you owe no tax. Others are non-refundable, meaning they can only reduce your tax to zero.

The Working Family Household and Dependent Care Credit and the Minnesota Earned Income Credit are two of the larger credits available to lower-income filers. If you have education expenses, you may also may have access to for credits related to tuition or student loan interest. Review the Minnesota Department of Revenue website or a tax professional to determine which credits explore to your situation.

Who must file a Minnesota state return

You must file a Minnesota state return if you are a resident and your income exceeds the standard deduction for your filing status. A resident is generally someone who lived in Minnesota for more than half the year or maintained a permanent home there. If you are not sure whether you are considered a resident, the Minnesota Department of Revenue provides guidance on its website.

Even if your income is below the standard deduction, you may want to file if you had taxes withheld — filing allows you to claim a refund of the overpayment. Similarly, if you are not required to file but had self-employment income, filing may allow you to claim the Earned Income Credit or other refundable credits.

Non-residents who earned income in Minnesota may also need to file a Minnesota return, even if they do not live in the state. This typically applies to people who worked in Minnesota for part of the year or had rental income from Minnesota property.

Frequently Asked Questions

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

If you are a Minnesota resident, you owe Minnesota tax on all your income, regardless of where you earned it. However, if you also paid tax to another state on the same income, Minnesota allows a credit for those taxes to prevent double taxation. You report the other state's tax on your Minnesota return to claim the credit.

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

The Minnesota Department of Revenue can assess penalties and interest on unpaid taxes. If you owe a significant amount, the state may place a lien on your property, garnish your wages, or offset your refunds. If you cannot pay in full, you can contact the Department of Revenue about payment plans or other options.

Can I file my Minnesota return without filing federal?

Yes, you can file a Minnesota return separately from your federal return. However, the income you report to Minnesota should match what you report to the federal government. If the IRS later adjusts your federal return, you may need to file an amended Minnesota return as well.

Is Minnesota state tax deductible on my federal return?

Yes, you can deduct Minnesota state income tax paid on your federal return, but only if you itemize deductions rather than take the standard deduction. The deduction is limited to $10,000 per year for all state and local taxes combined (including property tax and sales tax).

What is the difference between Minnesota tax brackets and federal tax brackets?

Minnesota and the federal government each have their own tax bracket systems with different rates and income thresholds. You calculate tax separately for each — your federal tax is based on federal brackets, and your Minnesota tax is based on Minnesota brackets. The two are independent, so your federal bracket does not determine your Minnesota bracket.