Progressive 4-Bracket System | 5.35% - 9.85% Rates | High-Tax State
| Income Range | Tax Rate | Tax on Bracket |
|---|---|---|
| $0 - $32,570 | 5.35% | Up to $1,742 |
| $32,571 - $106,990 | 6.80% | Up to $5,061 |
| $106,991 - $198,630 | 7.85% | Up to $7,194 |
| $198,631+ | 9.85% | On amount over $198,630 |
| Income Range | Tax Rate |
|---|---|
| $0 - $47,620 | 5.35% |
| $47,621 - $189,180 | 6.80% |
| $189,181 - $330,410 | 7.85% |
| $330,411+ | 9.85% |
Minnesota adjusts its tax brackets annually for inflation using the U.S. Chained Consumer Price Index. For 2025, brackets increased by 2.886% from 2024. This prevents "bracket creep" where inflation pushes you into higher tax brackets.
| State | Tax Structure | Rate/Top Rate | Tax on $75k |
|---|---|---|---|
| Minnesota | Progressive (4 brackets) | 5.35% - 9.85% | $6,803 |
| Wisconsin | Progressive (4 brackets) | 3.5% - 7.65% | ~$3,450 |
| Iowa | Flat | 3.8% | $2,850 |
| South Dakota | No income tax | 0% | $0 |
| North Dakota | Progressive (3 brackets) | 1.1% - 2.5% | ~$1,475 |
Reality Check: Minnesota has experienced net out-migration to lower-tax states like South Dakota, Wisconsin, and Florida. High earners ($150k+) can save $5,000-$15,000 annually by moving to a no-income-tax state. However, Minnesota offers excellent schools, healthcare, and quality of life that may justify the higher taxes for many families.
| Tax Type | Minnesota | National Ranking |
|---|---|---|
| Income Tax (Top Rate) | 9.85% | 5th highest |
| Sales Tax (Avg) | 7.5% (6.875% state + local) | Above average |
| Property Tax | 1.12% median | 15th highest |
| Overall Tax Burden | 10.2% of income | 8th highest |
Compare to: Texas (0% income tax) total burden ~$8,000 (8% of income)
Minnesota's high taxes fund robust public services:
Yes, Minnesota is one of only 9 states that tax Social Security benefits. However, lower-income retirees can subtract some or all benefits. For 2025, the subtraction phases out starting at $82,770 (single) or $107,110 (married). Above these thresholds, benefits are fully taxable.
Yes, Minnesota taxes most retirement income at the same progressive rates (5.35%-9.85%). There are no special deductions or exemptions for pension/401(k) withdrawals, making Minnesota less retiree-friendly than many states.
Minnesota uses the federal standard deduction: $14,600 for single filers and $29,200 for married filing jointly in 2025. These amounts are indexed to federal law.
Yes! Minnesota has reciprocal agreements with Michigan and North Dakota. This means if you live in MN but work in MI/ND (or vice versa), you only pay income tax to your resident state, simplifying filing.
Minnesota state tax returns are due on April 15, 2026 for the 2025 tax year (same as federal). Extensions are available until October 15, 2026.
Yes, capital gains are taxed as ordinary income at the progressive rates (5.35%-9.85%). There is no preferential capital gains rate in Minnesota.
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