If you’ve lived in the North Star State for a while, you know the drill. We pay for our nice parks and clean roads with some of the highest taxes in the country. It’s a trade-off. But honestly, even if you’ve been filing here for a decade, the way Minnesota income tax rates actually hit your paycheck can be confusing. People see that 9.85% top rate and panic. They think every dollar they make is being sliced in half by the state and the feds.
It doesn't work that way. Minnesota uses a progressive system.
Basically, your income is like a series of buckets. The first bucket of money is taxed at a low rate. Once that’s full, the next bucket is taxed a bit higher. Only the very last dollars you earn—the stuff at the tip-top of your salary—actually touch those scary high percentages. For 2025 and 2026, those buckets have shifted slightly because of inflation. If the state didn't adjust the brackets, you’d end up paying more in taxes just because your boss gave you a 3% cost-of-living raise. That’s called "bracket creep," and Minnesota avoids it by nudging the numbers up every year.
The Real Numbers for 2025 and 2026
Let’s look at what’s actually happening right now. For the 2025 tax year (the ones you're likely thinking about today), the rates stay the same: 5.35%, 6.80%, 7.85%, and 9.85%. It’s the income thresholds that moved.
✨ Don't miss: Notice and Acknowledgement of Receipt California: Why People Mess Up Service of Process
If you are filing as a single person in 2025, you don't even hit that second bracket until you’ve cleared $32,570 in taxable income. For married couples filing jointly, that jump doesn’t happen until $47,620.
But wait. There’s more for 2026.
The Minnesota Department of Revenue already released the 2026 adjustments. They’re bumping the brackets up by about 2.37% to keep pace with the Chained Consumer Price Index. So, for the 2026 tax year, a single filer won't hit the 6.80% bracket until they earn over $33,310. It’s a small change, sure. But it keeps the system from getting more expensive just because the price of eggs went up.
2025 Brackets (The Current Year)
Single Filers:
- 5.35% on the first $32,570
- 6.80% on income between $32,571 and $106,990
- 7.85% on income between $106,991 and $198,630
- 9.85% on everything over $198,630
Married Filing Jointly:
- 5.35% on the first $47,620
- 6.80% on income between $47,621 and $189,180
- 7.85% on income between $189,181 and $330,410
- 9.85% on everything over $330,411
That "Extra" Tax Nobody Mentions
Here is the kicker that catches high earners off guard. It’s the Net Investment Income Tax (NIIT). Starting back in 2024, Minnesota added a 1% surcharge on net investment income if you’re pulling in more than $1 million.
If you sell a business or have a massive stock gain, this is where the state gets its pound of flesh. It’s not part of the standard Minnesota income tax rates you see on the posters, but it’s very real. This tax "piggybacks" on the federal version, though the thresholds are different. If you’re in that million-dollar club, you aren't just paying 9.85%. You're effectively paying 10.85% on those investment gains.
The Standard Deduction Shift
Most people don't itemize anymore. Since the federal tax overhaul a few years back, the standard deduction is so high that it makes sense for most of us to just take the flat amount and run. Minnesota follows suit, but with its own numbers.
For 2025, the standard deduction for a single person is $14,950. For married couples, it’s $29,900.
Think of this as "free" money. The state ignores this first chunk of your income before they even start looking at those tax brackets. If you’re a married couple earning $70,000, you subtract that $29,900 first. Now you’re only being taxed on $40,100. Suddenly, you aren't even out of the lowest 5.35% bracket. This is why the "high tax Minnesota" reputation is a bit more nuanced than people think. If you’re middle class or lower income, the effective rate—what you actually pay versus what you earned—is often much lower than the 9.85% headline.
Big Wins for Families: The Child Tax Credit
If you have kids, the 2025 tax season is looking pretty good. Minnesota’s Child Tax Credit is one of the most generous in the nation. We’re talking up to $1,750 per qualifying child under age 18.
The best part? It’s refundable.
Even if you don’t owe a single dime in state taxes, you can still get this money back as a refund check. There is a phase-out, though. If you’re making over $30,000 (single) or $35,000 (joint), the credit starts to shrink. But it doesn't disappear entirely until you’re hitting six figures in many cases.
And for those who hate waiting until April to get their money, the state introduced advance payments in 2025. You can actually opt-in to get half of your credit in installments throughout the year—July, September, and November. It’s a huge help for parents dealing with the cost of back-to-school stuff or winter gear. Just remember that if you take the advance, your refund in the spring will be smaller.
What About Social Security?
This used to be a huge point of contention in St. Paul. For years, Minnesota was one of the few states that taxed Social Security benefits. That changed recently.
Now, most Minnesotans don't pay a cent of state tax on their Social Security. If your adjusted gross income is below $100,000 (for joint filers) or $78,000 (for singles), your benefits are generally 100% deductible. Even if you earn more than that, there’s a phase-out. It’s not an "all or nothing" cliff. This has made the state much more "retirement friendly," even if the winters still push people toward Florida.
Common Mistakes to Avoid
One thing that trips up new residents is the residency "day count." Minnesota is aggressive about this. If you spend more than 183 days here and maintain a "place of abode" (basically, a spot you can live in), they consider you a full-year resident.
Don't try to get cute with the math. They check cell phone records and credit card swipes if they audit you.
🔗 Read more: U of Minnesota Tuition Per Year: What Most People Get Wrong
Another weird one is the "K-12 Education Subtraction." If you have kids in school, save your receipts for paper, pens, and even musical instrument rentals. You can subtract those costs from your taxable income. It’s not a huge amount, but why leave money on the table?
Moving Forward: Your Next Steps
The tax landscape in Minnesota is shifting toward more credits for the bottom and middle, and slightly higher pressure on the top. If you want to stay ahead of the game, here is what you should do right now:
- Adjust your withholding. If you’re eligible for that new Child Tax Credit, you might be over-paying every month. Use the Minnesota Department of Revenue’s withholding calculator to see if you can put more money in your pocket now rather than waiting for a refund.
- Look into the 2026 advance payments. If you’re filing your 2025 return soon, check the box to receive advance payments for the 2026 credit. It’s basically an interest-free loan from the government to you.
- Check your investment thresholds. If you’re planning on selling a house (that isn't your primary residence) or a large block of stock, talk to a pro about the 1% NIIT surcharge. Timing that sale could save you thousands.
- Save those school receipts. Seriously. The K-12 subtraction is one of the easiest ways to shave a few hundred bucks off your taxable income, yet half of the people I talk to forget to track it.
Minnesota's tax system is a beast, but it’s a predictable one. As long as you know which bucket your money is falling into, you can plan for the bite.