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Minnesota Tax Guide: High Rates & Generous Credits

Navigate Minnesota's steep income tax brackets while taking advantage of available credits and deductions for 2025.

9.85%
Top Income Tax Rate
7.52%
Combined Sales Tax
1.08%
Property Tax Rate
#5
Tax Burden Rank

Tax Overview

Minnesota has one of the highest income tax rates in the nation, with a progressive system featuring four brackets and a top rate of 9.85%. This top rate applies to income above approximately $193,240 for single filers. The state's high tax rates are used to fund extensive public services, including education, healthcare, and infrastructure that consistently rank among the best in the nation.

Sales tax in Minnesota is 6.875% at the state level, with local taxes that can push the combined rate above 8% in some areas. Minnesota exempts clothing and groceries from sales tax, providing significant relief for families. Prescription and over-the-counter drugs are also exempt. These exemptions help offset the relatively high state sales tax rate.

Property taxes in Minnesota are above the national average, with effective rates around 1.08%. However, the state has one of the most generous property tax refund programs in the country, providing substantial refunds to homeowners and renters based on income. The state also offers a market value homestead exclusion that reduces the taxable market value of homes. Minnesota's overall tax burden is among the highest in the nation, but residents benefit from robust public services and quality of life.

Income Tax

Minnesota has the fifth-highest top income tax rate in the nation at 9.85%. The state offers various credits to offset the burden for lower-income residents.

Income RangeTax Rate
$0 – $31,6905.35%
$31,691 – $104,0906.80%
$104,091 – $193,2407.85%
$193,241 +9.85%

Sales Tax

State Rate6.875%
Avg. Local Rate0.64%
Combined Rate7.52%

Property Tax

Effective Rate1.08%
Median Annual Bill$2,918

Key Deductions in Minnesota

  • ✓Minnesota standard deduction matching federal amounts
  • ✓Property tax refund (income-based, up to $3,310 for homeowners)
  • ✓Renter's property tax refund (up to $2,430)
  • ✓K-12 education credit and deduction
  • ✓Child and dependent care credit (refundable)
  • ✓Minnesota 529 plan contribution subtraction (up to $3,000 per beneficiary)

Filing Information

Filing Deadline: April 15

Tax Authority: Minnesota Department of Revenue

Phone: (651) 296-3781

Website: https://www.revenue.state.mn.us

Frequently Asked Questions

Why is Minnesota's income tax so high?
Minnesota uses its tax revenue to fund extensive public services that consistently rank among the best nationally, including education, healthcare, and infrastructure. The top rate of 9.85% applies only to income above approximately $193,000 for single filers.
Is clothing taxed in Minnesota?
No, Minnesota exempts all clothing and footwear from sales tax, regardless of price. This is a significant benefit compared to many other states and can result in meaningful savings, especially for families.
What is the Minnesota property tax refund?
Minnesota offers income-based property tax refunds to both homeowners (up to $3,310) and renters (up to $2,430). The refund is based on a formula comparing your income to property taxes paid or rent constituting property taxes. It is one of the most generous programs in the country.
Does Minnesota tax Social Security?
Minnesota has been phasing out its tax on Social Security benefits. The state provides a subtraction that fully exempts Social Security for many residents, with the exemption phasing out at higher income levels.

Neighboring State Guides

WisconsinIowaSouth DakotaNorth Dakota

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