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Minnesota State Income Tax: Rates and Who Pays in 2023-2024

In this comprehensive guide, we will explore Minnesota’s income tax structure, its impact on residents, and the evolving tax landscape in the Land of 10,000 Lakes. Let’s dig into the details.
Minnesota State Income Tax
Minnesota State Income Tax: Rates and Who Pays in 2023-2024
Minnesota State Income Tax is a crucial aspect of the state's fiscal landscape. This guide will help you understand the various intricacies pertaining to the state income taxes in Minnesota. Read on to know more!
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Minnesota State Income Tax is a crucial aspect of the state’s fiscal landscape. With starting rates at 5.35%, residents navigate a progressive system, reaching up to 9.85%. Beyond income tax, sales tax rates are comparably high. In addition to income tax, the state enforces sales tax and estate tax, creating a multi-faceted financial environment. 

Recent reforms are making Minnesota more tax-friendly, particularly for retirees, by eliminating income tax on certain retirement benefits. This guidance sets the stage for exploring Minnesota’s income tax structure, its impact on residents, and the evolving tax landscape in the Land of 10,000 Lakes.

Meanwhile, check out Beem to file your tax returns online, for both Federal and State, for any filing status (single or joint) across all states and all types of tax forms.

Minnesota State Income Tax

In the 2022-2023 tax year, Minnesota State Income Tax follows a progressive system with four brackets, ranging from 5.35% to 9.85%. Notably, the state’s tax rates are relatively high, and the limited number of brackets can lead to individuals with varying incomes facing the same tax rate. Residents can use an income tax calculator to estimate their liability. 

Understanding these brackets is crucial; for instance, a single filer with $31,000 pays the same rate as one with $95,000. This structure aims to distribute the tax burden fairly, yet it highlights the progressive nature of Minnesota’s income tax system.

Tax Summary for 2022-2023:

Tax TypeMarginal Tax RateEffective Tax RateAmount
Federal Taxes22%11.67%$8,168
State Taxes (Minnesota)6.8%4.97%$3,476

Does Minnesota Have State Income Tax

Does Minnesota have state income tax? Indeed, Minnesota does have a state income tax. It employs a progressive tax system, meaning the tax rate increases with your income. The rates range from 5.35% to 9.85%. Minnesota residents must report their income, including income earned outside the state, and adhere to state-specific deductions and credits. Understanding these tax regulations is vital for those living in Minnesota to meet their tax obligations.

Minnesota State Income Tax – How much will the income after tax in Minnesota with Filing Status

Annual IncomeFiling Status –
Single
Filing Status –
Married Filing Jointly
Filing Status –
Head of Household
$12000$12,000$12,000$12,000
$15000$14,683$15,000$15,000
$20000$18,915$20,000$19,940
$22000$20,608$22,000$21,740
$30000$27,245$29,365$28,715
$35000$31,377$33,598$32,929
$36000$32,204$34,444$33,755
$42000$37,148$39,523$38,714
$45000$39,330$42,063$41,194
$48000$42,020$44,571$43,673
$52000$45,268$47,877$46,979
$54000$48,389$51,183$50,285
$60000$51,237$54,489$53,591
$62000$52,661$56,142$55,244
$65000$54,797$58,622$57,724
$70000$58,357$62,709$61,811
$75000$61,917$66,769$65,871
$80000$65,477$70,829$69,461
$85000$69,037$74,889$73,021
$90000$72,597$78,949$76,581
$92000$74,021$80,573$78,005
$95000$76,157$83,009$80,141
$114000$89,352$97,982$93,558
$115000$90,033$98,694$94,250
$140000$107,071$116,494$111,550
$150000$113,886$123,614$118,470
$160000$120,701$130,734$125,390
$165000$124,108$134,294$128,850
$190000$140,468$152,082$146,093
$185000$137,561$148,534$142,690
$260000$180,240$200,068$187,459
$300000$202,300$227,328$210,319
$350000$243,617$260,615$238,106
$120000$93,441$102,254$97,710
$135000$103,663$112,934$108,090
$170000$127,516$137,854$132,310
$180000$134,331$144,974$139,230
$250000$182,867$193,253$181,744
$28000$25,592$27,672$27,022
$32000$28,898$31,058$30,408
$40000$35,510$37,830$37,061
$44000$38,772$41,216$40,367
$53000$46,080$48,704$47,806
$56000$48,389$51,183$50,285
$58000$49,813$52,836$51,938

Minnesota State Income Tax Rates And Tax Brackets

Minnesota’s state income tax rates and brackets are adjusted annually in accordance with the rate of inflation. This ensures the tax system keeps pace with the changing cost of living. These indexed brackets are then rounded to the nearest $10. The state’s income tax is progressive, meaning it has different rates depending on how much you earn.

Minnesota has four tax rates: 5.35%, 7.05%, 7.85%, and 9.85%. These rates are applied to specific income brackets, which differ based on your filing status. Married couples filing jointly enjoy the broadest brackets, followed by the head of household filers (single parents maintaining a household), unmarried single filers, and married separate filers.

Tax RatesSingleMarried Filing SeparatelyMarried Filing Jointly and Qualified Widow(er)Head of Household
5.35%$0 $0$0$0
6.80% $28,081$20,526$41,051$34,571
7.85%$92,231$81,531$163,061$138,891
9.85%$171,221$142,406$284,811$227,601
Table 1.0. Minnesota’s tax rates by filling status

These brackets vary yearly, and for tax year 2022-2023, they apply to different income levels based on your filing status. Remember, if you file separately as a married couple, your brackets will be half the width of those for joint filers.

What Is Minnesota’s Standard Deduction?

Minnesota’s standard deduction is essential to your state income tax return. You can subtract a fixed amount to reduce your taxable income. You can choose either the standard deduction or itemize your deductions when filing your Minnesota taxes, regardless of whether you itemized on your federal return. For the tax year 2022, these standard deduction amounts apply:

  • Single or Married Filing Separately: $12,900
  • Head of Household: $19,400
  • Married Filing Jointly: $25,800

For the 2022 tax year, the standard deduction amounts in Minnesota vary depending on your filing status. If you’re single, the head of a household, and either visually impaired or born before January 2, 1957, your standard deduction increases by $1,650. If you qualify on both counts (visually impaired and born before January 2, 1957), your deduction increases by $3,300.

For married couples, the increase depends on the same criteria. The standard deduction rises if either spouse is visually impaired or born before January 2, 1957. It increases by $1,300 for each qualifying spouse and $2,600 if both criteria are met. This means you can reduce your taxable income by these amounts, potentially lowering your tax liability.

How To Calculate Minnesota State Income Tax?

Calculating Minnesota State Income Tax for the tax year 2023 is uncomplicated. The state employs a graduated tax system with rates ranging from 5.35% to 9.85%. To determine your tax liability, identify your taxable income—total income minus deductions and exemptions. 

For example, if your taxable income is $50,000, and you fall within the 7.05% tax bracket, your Minnesota state income tax would be $3,525 (7.05% of $50,000). Ensure accurate compliance by recognizing your income bracket and applying the corresponding tax rate. This straightforward process aids taxpayers in meeting the state’s tax regulations with precision and clarity.

Minnesota State Income Tax
Minnesota State Income Tax: Rates and Who Pays in 2023-2024 2

Do I Have To Pay Minnesota State Income Tax?

Minnesota mandates full-year residents to file a state tax return if their pre-tax income surpasses specified limits based on age and marital status.

Income Thresholds by Age and Filling Status:

Under Age 65:

  • Single: $12,525
  • Married (both under 65): $25,050

Over Age 65:

  • Single: $14,175
  • Married (one spouse 65 or older): $26,350
  • Married (both spouses 65 or older): $27,650

Moreover, Part-year residents and nonresidents must file if their pre-tax income from Minnesota sources exceeds $12,525 in 2021. Even if not obligated to file, claiming a refund is possible if Minnesota income taxes were withheld. Additionally, filing may unveil eligibility for refundable tax credits, such as the child and dependent care credit.

How To Pay Minnesota State Income Tax?

Suppose you have a Minnesota income tax liability. In that case, it is imperative to settle it by the standard deadline of April 18, 2023, even if you’ve received an extension for filing your federal return. If this deadline coincides with a weekend or legal holiday, your payment should be made on the subsequent business day. You have several payment options to meet your Minnesota state income tax obligation. These include:

  • Utilize the Minnesota Department of Revenue’s secure online services to pay easily. You can use credit cards, debit cards, or electronic checks. However, make sure your account is not linked to foreign banks.
  • You can contact a tax agent at 800-657-3676 if you prefer personalized assistance.
  • Minnesota also accepts traditional payment methods like personal checks, money orders, or cashier’s checks.

Am I A Resident For Minnesota Income Tax Purposes?

Determining your Minnesota income tax residency status follows specific guidelines:

Resident Status Rules

  • Minnesota residents must pay taxes on income earned inside and outside the state.
  • Exceptions exist for nonresidents under the Servicemembers Civil Relief Act.
  • You must file a Minnesota income tax return if your Minnesota gross income surpasses the minimum filing requirement ($12,900 for 2022). This can be done electronically or using Form M1, Individual Income Tax.

Part-Year Resident Status Rules

  • Part-year residency applies if you moved to or from Minnesota during the tax year and established residency (domicile).
  • It also applies if you spent at least 183 days in Minnesota during the year and had an abode suitable for year-round living.
  • You must file a Minnesota return if your Minnesota gross income exceeds the minimum filing requirement ($12,900 for 2022).

Nonresident Status Rules

  • Non-residents need to file and pay Minnesota income tax only if they earned more than 50% of their income in Minnesota.
  • Special rules apply for certain industries like transportation, airline, or shipping. Interstate workers may have tax obligations based on residence.
  • Self-employed transportation workers may have different tax obligations under federal laws.

Where is My Minnesota State Income Tax Refund?

To track your Minnesota state income tax refund, you have a few options:

  • The Where’s My Refund tool lets you check your refund status online. It’s updated overnight, Monday through Friday.
  • You can opt for direct deposit into your bank account, a secure and convenient way to receive your refund.
  • You can also call the automated phone system at 651-296-4444 or 1-800-657-3676 anytime, as it’s available 24/7.

You can contact the Taxpayer Rights Advocate Office if you’re facing financial hardship and need assistance. Tracking your refund is easy, ensuring you receive your money promptly.

Why Did My Minnesota State Income Tax Increase?

Your Minnesota state income tax may have increased due to a proposed surtax on capital gains. Under the governor’s plan, a surtax of up to 4 percent could be imposed on capital gains over $500,000, with an additional 4 percent on gains exceeding $1 million. This surtax would be applied on top of the highest individual income tax rate, potentially raising it to 10.85 percent. If enacted, Minnesota could have the country’s highest state income tax rate, reaching 14.85 percent in 2024, contributing to the increase in income tax for residents.

Minnesota Sales Tax

Minnesota imposes a state sales tax rate of 6.875%, with the possibility of localities adding up to 2% on top of this. While the state’s sales tax rate might seem high, essential items like groceries, clothing, and prescription drugs are exempt from taxation. This means that when you shop in Minnesota, you’ll often pay lower sales tax than many other states. 

Minnesota’s combined average sales tax rate, including the state and local rates, is around 7.455%. These exemptions aim to ease the tax burden on everyday necessities for residents and visitors. Use AI-powered Beem to file your taxes for both Federal and State online and get the maximum refund on your returns.

5 Things To Know About Minnesota Income Tax

Minnesota’s income tax system involves key elements affecting taxpayers. Here are five crucial aspects to be aware of:

1. Graduated Tax Rates

Minnesota employs a progressive tax system. This means your income tax rate increases with your earnings. Rates vary from 5.35% to 9.85%, ensuring higher-income individuals contribute a larger percentage.

2. Deductions and Credits

Optimize your tax situation by exploring deductions and credits. Minnesota offers options for standard or itemized deductions, plus various credits to significantly reduce your tax burden.

3. Filing Status Impact

Your filing status (single, married, filing jointly) affects your tax obligations. Age-related factors can also influence available deductions, emphasizing the importance of choosing the right status.

4. Sales Tax Considerations

Beyond income tax, Minnesota imposes sales tax. Understanding the structure, comprising state and local components is vital for individuals and businesses. Rates may vary based on your location within the state.

5. Residency Determination

Your residency status (full-year, part-year, nonresident) dictates how you’re taxed. Complying with Minnesota’s income tax regulations requires a clear understanding of these distinctions.

Minnesota State Income Tax FAQs

Q. Is Minnesota a high-tax state?

Yes, Minnesota is considered a high-tax state due to its relatively high income tax rates and sales tax rates.

Q. Is Minnesota a tax-friendly state?

Yes, Minnesota is a tax-friendly state.

Q. Is Minnesota a good place to live for taxes?

There is no link between high tax burdens and a state being a nicer place to live or having a better education system.

Q. How much of my paycheck goes to taxes in Minnesota?

In Minnesota, your paycheck is subject to a state income tax rate of 6.0%, but employers may pay as low as 5.4% with potential credits.

Q. Does Minnesota tax income earned in another state?

Minnesota residents are subject to state tax on income earned both within and outside the state. If you’ve paid income tax to both Minnesota and another state for the same income, you may be eligible for a credit.

Q. Does the state of Minnesota tax social security income?

Minnesota exempts Social Security income from state income tax for seniors earning less than $100,000 annually (married/joint) or $78,000 (single/head of household).

Q. Can Minnesota state income tax go up?

Yes, Minnesota state income tax can increase. The recent 1% Metro Sales Tax hike is part of several approved tax increases by the 2023 Minnesota Legislature and Governor Walz.

Q. Do seniors have to pay state income tax in Minnesota?

Yes, seniors in Minnesota are subject to state income tax on retirement income, with rates ranging from 5.35% to 9.85%.

Q. Does Minnesota have state income tax for the military?

Minnesota does not tax active service military pay earned by nonresidents, as federal law prohibits states from taxing such income.

Q. What are Minnesota state income taxes for LLCs?

Minnesota LLC members are subject to federal income tax at the 15.3% self-employment rate and state income tax at a graduated rate.

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This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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