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Minnesota Income Tax: 10.85% Top Rate & Social Security Exemption

10.85% Top Rate • SS Partially Exempt • No Capital Gains Preference • $3M Estate Exemption • High Overall Burden
Minn. Stat. §290.06Minn. Stat. §290.0132Minn. Stat. §291.03
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Minnesota imposes one of the highest state income tax rates in the United States - a top ordinary rate of 9.85% on income above $337,930 for married filers in 2026, rising to an effective 10.85% on net investment income over $1,000,000. Unlike states with high top rates that kick in at very high income levels, Minnesota's brackets escalate at relatively modest income thresholds, meaning a broader swath of middle-income taxpayers pay the higher rates. Minnesota also taxes Social Security benefits, though a partial exemption is available for lower and middle-income recipients. The combination of high income tax rates and a separate estate tax makes Minnesota one of the most aggressive state tax environments for high-income earners and wealthy estate planners.

Minnesota 2026 Income Tax Rates (MFJ)

$0 - $48,700: 5.35%

$48,701 - $193,480: 6.8%

$193,481 - $337,930: 7.85%

Over $337,930: 9.85%

Additional 1% net investment income tax on net investment income over $1,000,000 (all filers). Effective top rate on that income: 10.85%.

Brackets adjusted annually for inflation. Single filer 2026 brackets: 5.35% to $33,310, 6.8% to $109,430, 7.85% to $203,150, and 9.85% above that.

Social Security: Partial Exemption

Minnesota taxes Social Security benefits that are included in federal gross income. However, a partial exemption is available for taxpayers below certain income thresholds. For married filers with federal adjusted gross income at or below $110,780 (2026, adjusted annually), Social Security benefits may be fully or partially excluded from Minnesota taxable income. The exemption phases out as income rises and is completely eliminated at higher income levels. High-income retirees who have moved to Minnesota may face Minnesota income tax on Social Security income that is not taxed in Florida, Texas, or other no-income-tax states.

Minnesota Estate Tax: $3 Million Exemption

Minnesota has a separate estate tax with a $3 million exemption - significantly below the federal $15 million exemption under OBBBA. Minnesota estate tax rates range from 13% to 16% on amounts above the exemption. A Minnesota resident dying with a $10 million estate owes zero federal estate tax (under the $15 million federal exemption) but owes significant Minnesota estate tax on $7 million at rates up to 16%. Minnesota does not allow portability of the unused exemption between spouses for Minnesota estate tax purposes - each spouse's estate uses only their own $3 million exemption.

Minnesota estate tax applies to nonresident estates owning Minnesota real estate or tangible personal property located in Minnesota. A California resident who owns a Minnesota lake cabin may owe Minnesota estate tax on the cabin's value at death, even though they are not a Minnesota resident. Minnesota taxes the in-state property of nonresident decedents.
Related Topics
State & Compliance HubAll state tax topics Social Security TaxFederal SS taxation - Minnesota also taxes SS above threshold Estate Tax GuideMinnesota $3M exemption vs. $15M federal - gap planning No Income Tax StatesCompare Minnesota 10.85% to zero-tax alternatives State Residency ChangeLeaving Minnesota - domicile change requirements OBBBA State ConformityMinnesota conformity to federal OBBBA changes
Authority: Minn. Stat. §290.06 (Minnesota income tax rates - graduated rates from 5.35% to 9.85%; brackets adjusted annually); Minn. Stat. §290.033 (1% net investment income tax on net investment income over $1,000,000, bringing the effective top rate on that income to 10.85%); Minn. Stat. §290.0132 subd.26 (Social Security exemption - partial exemption for taxpayers below income thresholds; phases out as income rises; married filers at or below $110,780 (2026) may exclude the full amount, with a phaseout above that; eliminated at higher incomes); Minn. Stat. §291.03 (Minnesota estate tax - rates 13% to 16% on amounts above $3,000,000 exemption; no portability between spouses; applies to Minnesota real and tangible personal property of nonresident decedents; separate from federal estate tax); Minn. Stat. §290.06 subd.1c (capital gains - no preferential rate under Minnesota law; short-term and long-term capital gains taxed at ordinary income rates up to 10.85%).