Minnesota does not tax capital gains at a special lower rate. A gain from stocks, a business or real estate is part of your federal adjusted gross income, and Minnesota taxes it with the rest of your income at graduated rates. Since 2024 there is also a separate 1% net investment income tax (NIIT) that applies only to net investment income above $1,000,000.
This guide is built from the Minnesota Statutes and session laws on the Revisor of Statutes site (sections 290.01, 290.06, 290.033 and others), two Minnesota Department of Revenue pages (the 2026 bracket table and the NIIT guidance) and three IRS pages, all read on 3 November 2026. We did not read the Department's form instructions for individual returns, so the statute is our authority for anything the Department pages do not address.
Section 290.01 says that for an individual, net income means federal adjusted gross income with the modifications provided in the statute, and that for a resident individual taxable net income is the same as net income. A capital gain that is in your federal adjusted gross income is therefore in the amount Minnesota taxes, unless one of the modifications moves it out. We found no lower rate for long-term gains and no holding-period rule in the sections we read.
The federal system treats long-term and short-term gains differently. IRS Topic 409 says that if you have a net capital gain a lower tax rate may apply than the rate that applies to ordinary income, that a gain is generally long-term if you hold the asset more than one year, and that net short-term gains are taxed as ordinary income at graduated rates. The Minnesota rate schedule in section 290.06 applies to taxable net income and does not mention that split.
Section 290.06, subdivision 2c, sets four rates for individuals, estates and trusts: 5.35%, 6.8%, 7.85% and 9.85%. The same four rates apply to married joint filers, unmarried individuals and heads of household, with different bracket widths. The statute sets the dollar amounts using 2019 as the statutory year, and says the commissioner must annually adjust them while the rate of each bracket must not change. The Department of Revenue's table for tax year 2026 is below.
| Rate | Single | Married filing jointly | Head of household |
|---|---|---|---|
| 5.35% | Up to $33,310 | Up to $48,700 | Up to $41,010 |
| 6.8% | $33,311 to $109,430 | $48,701 to $193,480 | $41,011 to $164,800 |
| 7.85% | $109,431 to $203,150 | $193,481 to $337,930 | $164,801 to $270,060 |
| 9.85% | $203,151 and over | $337,931 and over | $270,061 and over |
Source: Minnesota Department of Revenue, income tax brackets for tax year 2026. A large gain is added on top of your other income and can push part of it into a higher bracket. Bracket amounts for 2027 had not been published when we looked on 3 November 2026.
Section 290.033 imposes, in addition to the regular income tax, a tax on the net investment income of individuals, estates and trusts in excess of $1,000,000 at a rate of one percent. The Department of Revenue says it applies to taxable years beginning after December 31, 2023, so 2026 is the third year it applies. The statute still contains it with the same rate and threshold, and we found no repeal or suspension.
Net investment income takes the meaning given in section 1411(c) of the Internal Revenue Code, with an exception for the net gain from disposing of property classified as class 2a (agricultural land and buildings, per section 273.13). The Department says that if a property has more than one classification and the county assessor can practically separate the acreage, only the class 2a acreage is excluded. IRS Topic 559 describes the federal version of the definition as including net gains from the disposition of property such as stocks, bonds, mutual funds and real estate. The Minnesota threshold is stated as one figure for everyone, $1,000,000; the statute has no filing-status split or inflation adjustment, and the Department's page does not address married filers.
The Minnesota tax is separate from the federal 3.8% NIIT described in IRS Topic 559, which has its own thresholds and applies on top. According to the Department, you report it on Schedule NIIT filed with Form M1 (Form M2 for estates and trusts), the credit for tax paid to another state cannot be used against it, and it cannot be paid through a composite income or pass-through entity tax election. If you expect to owe it, the Department advises adjusting withholding or estimated payments to avoid underpayment penalties.
A change that starts in 2027: Laws 2026, chapter 128 (signed by the governor on 27 May 2026) amends section 290.033, effective for taxable years beginning after December 31, 2026. As we read it, it adds an opportunity zone adjustment to net investment income: increased by the new opportunity zone addition and reduced by the matching subtraction. It does not change the one percent rate or the $1,000,000 threshold.
This table is our arithmetic, not an official calculation. It shows the Minnesota NIIT only (1% of net investment income above $1,000,000), not the regular income tax on the same gain.
| Net investment income for the year | Minnesota NIIT |
|---|---|
| $800,000 | $0 |
| $1,000,000 | $0 |
| $1,500,000 | $5,000 |
| $3,000,000 | $20,000 |
| $10,000,000 | $90,000 |
Worked example (ours): a Minnesota resident for the full year has $1,500,000 of net investment income, mostly a stock gain. The NIIT is 1% of the $500,000 above $1,000,000, which is $5,000. A gain taxed in the top income tax bracket and also above the $1,000,000 line therefore faces 9.85% plus 1%, or 10.85% on that slice, before credits and deductions.
Section 290.17 says the income of resident individuals is not subject to allocation outside the state, so a full-year resident is taxed on a gain wherever the asset is. Income or gains from intangible personal property not employed in a business are assigned to Minnesota if the recipient is a Minnesota resident, which covers stocks and similar assets sold by residents.
An individual who is not a Minnesota resident for the entire year computes the Minnesota tax as the statute provides and then multiplies the liability by a fraction: Minnesota source federal adjusted gross income (with listed adjustments) over total federal adjusted gross income (with listed adjustments). The same all-year-resident-then-fraction approach applies to the NIIT: the tax is calculated as if you were a resident for the entire year and multiplied by net investment income allocable to Minnesota divided by total net investment income.
Example (ours): a part-year resident has $2,000,000 of net investment income, of which 25% is allocable to Minnesota. As if a full-year resident the NIIT is $10,000; times 25% is $2,500. The statute also says a gain on selling a partnership interest is allocable to Minnesota in the ratio of the original cost of partnership tangible property in the state to that everywhere. For a nonresident's gain on Minnesota real estate, section 290.17, subdivision 2(b), assigns income or gains from tangible property located in Minnesota that is not employed in the business of the recipient to Minnesota, so on our reading such a gain is Minnesota-source; property used in a business follows the apportionment rules in the same section. Confirm with the Department for your facts.
Under Laws 2026, chapter 128, Minnesota adds a rule for opportunity zone gains: section 290.0131, subdivision 24, makes the gain excluded or deferred under federal section 1400Z-2 an addition to income, and section 290.0132, subdivision 40, gives a subtraction when a gain that was previously added is recognized later. As we read chapter 128, these provisions apply to taxable years beginning after December 31, 2026, so they do not change your 2026 return. Confirm the effective date and the rules for the year of your investment before relying on this.
IRS Topic 701 says you may qualify to exclude up to $250,000 of the gain on the sale of your main home from your income, or up to $500,000 if you file a joint return with your spouse. Minnesota starts from federal adjusted gross income, so our reading is that gain excluded federally is not in your Minnesota starting figure. The Department's NIIT page does not address home sales, and we did not find a Minnesota page that says this in so many words, so confirm with the Department if the amount is large.
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