Minnesota Income Tax Calculator

Minnesota state tax quick facts Income tax: 5.35% - 9.85% Sales tax: 6.875% - 8.375% Property tax: 1.15% average effective rate Gas tax: 28.6 cents per gallon for regular gasoline and diesel

State income tax rates in the “Land of 10,000 Lakes” are among the highest in the nation, ranging from 5.35% to 9.85%, the fifth-highest top rate in the country. The state’s property taxes and sales taxes are likewise above average, each ranking in the top 20 of all states. However, the impact of those rates will vary greatly depending on a taxpayer’s income level, home value and spending habits. Below, we’ll take a close look at Minnesota’s tax rates, as well as all of the most important rules and exceptions.

Minnesota Income Tax

The Minnesota state income tax is based on four tax brackets, with higher marginal rates for higher income earners. The table below shows the brackets filers in Minnesota.

As mentioned above, those are among the highest state income tax rates in the country. But these rates apply to taxable income, not gross income. Taxable income takes into account all applicable deductions and exemptions; in Minnesota, these track very closely to federal deductions and exemptions.

With the exception of the deduction for state and local income taxes, all federal itemized deductions can also be claimed on Minnesota state income tax returns. The Minnesota standard deduction for 2018 is $6,500 for single filers. For married couples, the standard deduction is $13,000 total if filing jointly and $6,500 (each) if filing separately. Heads of household get a standard deduction of $9,550. Minnesotans, whether married or single, may also claim personal exemptions of $4,150 for themselves and for each of their dependents.

Itemized deductions in Minnesota phase out for taxpayers above a certain income level. For married persons filing separately, the phase out begins at $93,175 of federal adjusted gross income (AGI). For all other filers, the phase out begins at $186,350 of federal AGI.

One rule that may be important to many retirees is that Minnesota taxes Social Security benefits at the same level as the federal government (which is up to 85% of Social Security benefits). Most states do not tax Social Security benefits at all.

Minnesota Tax Credits

There are a number of tax credits which can lower your overall tax bill in Minnesota. The three most significant tax credits are the Working Family Credit (available to taxpayers who are eligible for the federal Earned Income Tax Credit), the Dependent Care Credit and the K-12 Education Credit (which allows taxpayers with children in school to deduct expenses).

Minnesota Sales Tax

The state sales tax rate in Minnesota is 6.875%. Additionally, many counties and cities in Minnesota levy their own local sales taxes, with rates of up to 1.5%. The table below shows the sales tax rates for every county and the largest cities in Minnesota.

As you can see, in Minnesota’s four largest cities, sales taxes (local plus state) exceed 7.5%. In Minneapolis, there are surtaxes of 3% on restaurants, liquor and entertainment in the downtown area. Two other cities, Mankato and Proctor, have their own surtaxes on food and beverages, of 0.5% and 1.0% respectively.

While those taxes apply to prepared food (as does the regular state sales tax), food purchased at a grocery store, for off-premises consumption, is generally not taxable in Minnesota. So, for example, you would pay no sales tax on cereal, spaghetti sauce, sugar or food coloring. On the other hand, candy, soft drinks and food from vending machines are all taxable.

Additionally, most clothing is not taxable in Minnesota, an important exception that separates Minnesota from many other states. Blue jeans, shoes, coats, t-shirts and even diapers are all nontaxable. “Clothing accessories,” however, like hair clips, umbrellas and backpacks, are taxable.

Many services are also subject to sales tax in Minnesota. Among the services for which Minnesotans have to pay sales tax are: installations, laundry services, lawn care, parking services and telecommunications services.

Minnesota Property Tax

Property taxes in Minnesota are primarily administered and collected by county authorities. This means that rates will vary depending on where you live. They range from a low of 0.45% (in Aitkin County), to a high of more than 1.31% (in Hennepin County). On average, annual property tax payments in Minnesota are about $2,296, 19th highest in the country. The average effective property tax rate in the state is 1.15%. This is very close to the national average of 1.18%.

If you are thinking about buying a home in Minnesota, the property taxes of each county are just one of many things to consider. Our Minnesota mortgage guide is a great place to start researching the ins and outs of getting a mortgage in the state.

Minnesota Estate Tax

The estate tax in Minnesota currently applies to taxable estates worth more than $2.4 million. The exemption was $2.1 million for deaths in 2017 and will continue to increase over the next few years. It will be $2.7 million for 2019 and $3 million for 2020 and beyond.

Estates with a taxable value greater than that amount must file an estate tax return. Note that recent gifts (those made within three years prior to the decedent’s death) are considered when evaluating the estate. The table below shows the marginal rates and brackets to which those rates apply.

Minnesota Cigarette Tax

Minnesota has increased its tobacco taxes in recent years, up to the current rate of $3.04 per pack of 20 cigarettes. That is eighth-highest in the country.

Minnesota Gas Tax

The statewide gas tax in Minnesota is 28.6 cents per gallon of regular gasoline, which ranks as the 28th-highest gas tax in the U.S.

Photo credit: flickr

There are 11,842 separate lakes that are at least ten acres in surface area in Minnesota. The average high January temperature in the city of Minneapolis is 23.7 degrees Fahrenheit. The Mayo Clinic, based in Rochester, Minnesota, is considered one of the best medical practices in the world.