Yes, Minnesota has a state income tax

Minnesota taxes your income at the state level. Unlike seven states that have no state income tax at all, Minnesota requires residents and part-year residents to file a state tax return and pay tax on wages, self-employment income, investment gains, and other earnings. The state uses a progressive tax system, meaning the tax rate increases as your income rises.

If you work in Minnesota but live in another state, you may owe Minnesota tax on income earned within the state. If you live in Minnesota but work in a state with no income tax (like Iowa, which borders Minnesota), you still owe Minnesota tax on that income. The key factor is where you earned the money and where you lived during the tax year.

Key Takeaways

  • Minnesota has five tax brackets ranging from 5.35% to 9.85%, with higher earners paying higher rates.
  • You must file a Minnesota state return if you earned income in the state or lived there for part or all of the tax year, even if you owe no tax.
  • Minnesota allows credits for taxes paid to other states, so you typically do not pay tax twice on the same income.
  • The Minnesota Department of Revenue administers state tax law and provides forms and instructions on its website.

Minnesota's five tax brackets and rates

Minnesota's income tax brackets change each year because they are adjusted for inflation. For the 2024 tax year, the state has five brackets. The lowest rate applies to the first portion of your income, and each higher bracket applies only to income above the previous threshold. This means you do not pay the top rate on all your income — only on the portion that falls into the highest bracket you reach.

The five rates are 5.35%, 6.85%, 7.85%, 8.85%, and 9.85%. The exact income thresholds where each rate begins depend on your filing status (single, married filing jointly, head of household, or married filing separately) and change annually. You can find the current year's brackets on the Minnesota Department of Revenue website or in the instructions that come with Form M1, Minnesota's main income tax return.

Minnesota also taxes capital gains at a rate of 9.85% on gains above $250,000 for single filers and $500,000 for married couples filing jointly. This applies to profits from selling stocks, real estate, or other investments held for more than a year.

Who must file a Minnesota state return

You must file a Minnesota return if you lived in the state on December 31 of the tax year, even if you had no income. You must also file if you lived in Minnesota for part of the year and earned income there. Part-year residents — people who moved into or out of Minnesota during the year — must file if their income exceeded the filing threshold for their status.

If you worked in Minnesota but lived elsewhere, you must file a Minnesota return on income earned in the state. Minnesota will not tax income you earned outside the state if you were not a resident. However, if you moved to Minnesota mid-year, you owe tax on all income earned after you became a resident, regardless of where you earned it.

The income thresholds that trigger a filing requirement vary by age and filing status. A single person under 65 with no dependents typically must file if their income exceeds a certain amount (which changes yearly). Older residents and those with dependents may have different thresholds. Check the Minnesota Department of Revenue website for the current year's requirements.

How Minnesota taxes differ from federal income tax

Minnesota and the federal government both tax income, but they use different rates, brackets, and rules. Your federal tax is calculated on Form 1040 using federal brackets and deductions. Your Minnesota tax is calculated separately using state brackets and deductions. You file both returns — the federal return to the IRS and the Minnesota return to the Minnesota Department of Revenue.

Some deductions allowed by the federal government are not allowed by Minnesota, and vice versa. For example, Minnesota allows a working family credit that the federal government does not. Minnesota also does not allow you to deduct state and local taxes (SALT) the way the federal return does. Because the two systems are separate, your federal tax liability does not automatically determine your state tax liability.

Minnesota uses your federal taxable income as a starting point and then makes adjustments. This is why many tax software programs ask you to complete your federal return first — the state return builds from the federal numbers and modifies them according to Minnesota rules.

Credits and deductions available in Minnesota

Minnesota offers several credits that reduce the amount of tax you owe. The Working Family Credit is available to lower-income workers and is similar to the federal Earned Income Tax Credit. The Dependent Care Credit helps pay for child care or dependent care expenses. The Education Credit covers tuition and fees paid to Minnesota colleges and universities. The Property Tax Refund is available to renters and homeowners with lower incomes.

On the deduction side, Minnesota allows a standard deduction (a flat amount you can subtract from income) or itemized deductions (specific expenses you list). The standard deduction amount varies by filing status and age and changes each year. If you are over 65 or blind, you get an additional standard deduction. Most people use the standard deduction because it is simpler and often results in a lower tax bill than itemizing.

Minnesota also allows deductions for contributions to retirement accounts like traditional IRAs and 401(k)s, though the rules are complex and depend on your income and whether you have access to an employer plan. Student loan interest paid during the year may be deductible. Alimony paid (under agreements signed before 2019) is deductible.

How to file your Minnesota state return

You file your Minnesota return using Form M1 (the main return) plus any schedules that explore to your situation. The form asks for your name, address, Social Security number, filing status, and income from all sources. You then calculate your tax using the brackets, subtract any credits you may have access to for, and arrive at the amount you owe or the refund you are due.

You can file on paper by mailing Form M1 and supporting documents to the Minnesota Department of Revenue by the important date (usually April 15, or the next business day if April 15 falls on a weekend or holiday). You can also file electronically using tax software or through a tax preparer. Electronic filing is faster and reduces errors because the software calculates the math for you.

If you owe tax, you can pay by check, money order, electronic funds withdrawal, or credit card (though credit card payments include a processing fee). If you are due a refund, you can choose to receive it by direct deposit to your bank account or by paper check. Direct deposit is faster — refunds typically arrive within two to three weeks instead of four to six weeks.

Minnesota tax credits for lower-income residents

The Working Family Credit is Minnesota's largest tax credit for lower-income workers. It is based on your earned income and filing status, and the amount phases out as your income rises. Unlike the federal Earned Income Tax Credit, which is calculated the same way nationwide, the Minnesota credit has its own rules and amounts. You claim it on Schedule M1WFC.

The Property Tax Refund is available to renters and homeowners whose property taxes or rent are high relative to their income. Renters are treated as paying property tax (a portion of rent is assumed to go toward the landlord's property taxes). The refund is calculated on Schedule M1PR and is limited to residents with income below a certain threshold, which changes yearly.

The Dependent Care Credit covers expenses you paid for child care or care for a dependent adult so you could work. You claim it on Schedule M1DC. The credit is a percentage of the expenses you paid, up to a maximum amount. Unlike the federal dependent care credit, the Minnesota credit is refundable for some lower-income filers, meaning you can receive a refund even if you owe no tax.

Frequently Asked Questions

Do I have to file a Minnesota return if I only lived there part of the year?

Yes, if you lived in Minnesota on December 31 or earned income in the state during the year. Part-year residents must file if their income exceeded the filing threshold for their status. You report only the income you earned while a Minnesota resident or earned in Minnesota while a nonresident.

What if I worked in Minnesota but lived in another state?

You must file a Minnesota return on income earned in the state. Minnesota will tax you on wages, self-employment income, and other earnings from Minnesota sources. However, you can claim a credit on your Minnesota return for taxes paid to the other state, so you typically do not pay tax twice on the same income.

Is Minnesota's state income tax higher than the federal rate?

Minnesota's top rate is 9.85%, which is lower than the federal top rate of 37%. However, you pay both — federal and state taxes are separate. Your total tax bill includes federal tax, Minnesota state tax, and any local taxes your city or county imposes. The combined burden depends on your income and which deductions and credits you may have access to for.

Can I deduct federal taxes paid from my Minnesota return?

No. Minnesota does not allow you to deduct federal income taxes paid. You calculate your Minnesota tax based on Minnesota rules, which do not include a deduction for federal taxes. However, you can deduct state and local taxes (SALT) on your federal return, up to $10,000 per year.

Where do I find the current Minnesota tax forms and instructions?

The Minnesota Department of Revenue website (state.mn.us/revenue) has all current forms, including Form M1 and its schedules, plus detailed instructions. The site also has a tax rate table showing the current year's brackets and standard deduction amounts. You can read forms as PDFs or order paper copies by mail.