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Minnesota Tax Guide: What You’ll Pay in 2024

Posted on 03/05/24 by Michelle Tuccitto Sullo

Though Minnesota residents in the top salary tier pay one of the highest income tax rates in the country, the state has average sales and property tax rates. Minnesota has multiple programs that can help older residents save on their taxes.

The big picture:


  • Income tax: 5.35–9.85 percent

Minnesota has a graduated rate income tax. It starts at 5.35 percent for lower-income residents, increasing gradually to 9.85 percent.

  • Property tax: 1.11 percent of a home’s assessed value (average)

Real estate taxes vary, depending where you live. The average property tax rate was 1.11 percent of a home’s assessed value in 2021, according to the Tax Foundation.

  • Sales tax: 8.04 percent (average combined state and local)

The state levies a 6.875 percent sales tax. Local sales tax rates are as high as 2.15 percent, with an average of 1.16 percent. The average combined state and local sales tax rate is at 8.04 percent, according to Tax Foundation data from January 2024.

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How is income taxed in Minnesota?


Minnesota, like the majority of states, has a graduated rate income tax system, with the percentage increasing based on income thresholds.

Minnesota’s income tax falls into four brackets: 5.35 percent, 6.80 percent, 7.85 percent and 9.85 percent.

Not all of your taxable income is taxed at the same rate. For example, if you are a single filer and your taxable income is $120,000, the first $30,070 would be taxed at 5.35 percent, income above $30,070 to $98,760 would be taxed at 6.80 percent, and your income above $98,760 would be taxed at 7.85 percent.

The following charts outline tax rates and brackets for the 2023 tax year.

Single filers:

Income
Tax rate
0 to $30,070
5.35% 
More than $30,070 to $98,760 
6.80%
More than $98,760 to $183,340
7.85%
More than $183,340
9.85%

Source: Minnesota Department of Revenue

Head of household filers:

Income
Tax rate
0 to $37,010
5.35%
More than $37,010 to $148,730 
6.80%
More than $148,730 to $243,720
7.85%
More than $243,720
9.85%

Source: Minnesota Department of Revenue

Married filing joint return:

Income
Tax rate
$0 to $43,950
5.35% 
More than $43,950 to $174,610
6.80%
More than $174,610 to $304,970
7.85%
More than $304,970
9.85%

Source: Minnesota Department of Revenue

Married taxpayers filing separate returns:

Income
Tax rate
$0 to $21,975
5.35%
More than $21,975 to $87,305
6.80%
More than $87,305 to $152,485
7.85%
More than $152,485
9.85%

Source: Minnesota Department of Revenue

Watch the video below to learn how to identify your 2023 federal income tax brackets.

Understanding Your 2023 Income Tax

Are pensions or retirement income taxed in Minnesota?


Yes. Minnesota taxes state residents’ pensions, including federal pensions. Those who have a pension for public service may qualify for a deduction.

Since 2022, financial institutions have been required to withhold Minnesota income tax on pension distributions. You may ask a pension administrator not to withhold the tax, but if you do, you may have to pay estimated tax.

Minnesota residents can also expect to pay tax on income from annuities and money drawn from IRAs and 401(k)s. Roth IRA distributions are nontaxable.

The state does not tax military retirement pay or retirement benefits issued through the U.S. Railroad Retirement Board.

Find more information about pension and retirement taxes, exemptions and deductions on the Minnesota Department of Revenue website.

AARP’s Retirement Calculator can help you determine if you are saving enough to retire when — and how — you want.

What about investment income? 


Capital gains from investments are treated as ordinary personal income and taxed at the same rates as other income in Minnesota.

This includes long-term capital gains (profits from selling an asset you have owned for more than one year) and short-term capital gains (profits from selling an asset you have owned for one year or less.)

With capital gains from taxpayer home sales, Minnesota follows the same rules as the federal government, allowing an individual taxpayer to exclude up to $250,000 of gain on the sale of a home, or $500,000 for married couples filing a joint return.

Starting in tax year 2024, an additional 1 percent tax on net investment income over $1 million goes into effect. This can include net investment income from various sources such as interest, dividends, capital gains, rentals and royalties. The new tax will impact individuals, estates and trusts. The 1 percent will be in addition to the current 9.85 percent, for a total of 10.85 percent starting with the 2024 tax year.

Does Minnesota tax Social Security benefits?


Yes. Minnesota residents may owe both state and federal taxes on their Social Security benefits, depending on the amount they receive.

On the federal level, up to 50 percent of your benefits will be taxed if you file an individual tax return and make $25,000 to $34,000 in total income — or if you’re a married couple filing jointly and make $32,000 to $44,000 in total income. Up to 85 percent of your benefits will be taxed if your total income is more than $34,000 individually or $44,000 as a couple. If you receive less than $25,000 as an individual and $32,000 as a couple, your Social Security benefits aren't taxed federally.

As for state taxes, in May 2023, Minnesota passed legislation which will allow more retirees to keep their Social Security income in 2024. Starting with the 2023 tax year, people with taxable income up to $78,000, or $100,000 for a couple, are exempt from paying state taxes on their benefits. If you receive more than those amounts, you may qualify for a partial tax break.

See the Minnesota Department of Revenue’s website for details and more information.

AARP's Social Security Calculator can assist you in determining when to claim and how to maximize your Social Security benefits.

How is property taxed in Minnesota?


Property tax in Minnesota is a local tax based on the value of your home, which is assessed by your county and varies depending on where you live.

The average property tax rate in Minnesota was 1.11 percent of a home’s assessed value in 2021, according to the Tax Foundation. The median property tax paid for 2021 ranged from $899 in Traverse County to $3,891 in Carver County.

The Minnesota Department of Revenue has information on how residents may qualify for a property tax refund, which is designed to provide tax relief depending on your income and property taxes.

Minnesota also offers a Homestead Credit Refund, which can provide tax relief to homeowners who qualify.

What about sales and other taxes?


  • Sales tax: The state levies a 6.875 percent sales tax, and local sales tax rates are as high as 2.15 percent. The average combined state and local sales tax rate is at 8.04 percent, according to January 2024 Tax Foundation data. The Minnesota Department of Revenue has a map showing sales tax rates statewide. The sales and use tax applies to most retail sales of goods, plus some services in the state. 
  • Groceries: Many groceries are tax-exempt, but you will pay sales taxes on certain food items such as candy and soda. 
  • Gas tax: The gasoline tax is 28.5 cents a gallon, which is included in the price at the pump. 
  • Vehicle tax: A motor vehicle sales tax of 6.875 percent applies to most vehicle sales or transfers. This includes sales by dealerships, leasing companies, private individuals and businesses. A local vehicle excise tax may apply in some counties and cities. 
  • Alcohol: Beer, wine and liquor sold by a business with a liquor license are subject to the 6.875 percent state general rate sales tax, a 2.5 percent liquor gross receipts tax and applicable local taxes. That tax may be passed on to the consumer. State beer excise tax rates for 2023 for Minnesota were at 47 cents per gallon, according to the Tax Foundation. 
  • Hotels: Short-term lodging is taxable, and guests may have to pay taxes levied by municipalities.
  • Lottery: If you win the lottery, your winnings are subject to both federal and state income taxes. Minnesota taxes all of its residents’ gambling winnings, including winnings in the state, from lottery winnings around the United States and other countries, and internet gambling. Residents must report these winnings on their Minnesota tax returns. 

Will I or my heirs have to pay estate or inheritance tax?


Minnesota has an estate tax on decedents’ estates. The executor or representative of the estate must file and pay the estate tax. The Minnesota Department of Revenue has an estate tax calculator on its website.

On the federal level, estate tax can kick in for high-net-worth estates.

Minnesota does not have an inheritance tax. Beneficiaries typically don’t have to include inheritance on their income tax return. An exception is if you inherited an IRA or annuity which included the deceased person’s pretax dollars. In that situation, you will have to pay income tax.

Are there any tax breaks for older Minnesota residents?


Yes, the state has multiple programs to help older residents save.

If you are 65 or older, or have a permanent and total disability, you may qualify for a subtraction that would lower your taxable income. You also may qualify for the state’s Social Security Benefit Subtraction or the Railroad Retirement Board Benefits Subtraction.

If you live in the state for only part of the year, you can seek part-year resident status.

Minnesota offers a Property Tax Deferral for Senior Citizens program. This may allow you to defer a portion of the property taxes you owe, depending on factors such as your age, income and how long you have owned your home.

Through the Homestead Credit Refund or Renter’s Property Tax Refund programs, you may be eligible for a refund based on your household income and the property taxes or rent you paid on your primary residence.

For more information, visit the Minnesota Department of Revenue’s website, which outlines several programs geared toward helping seniors save on their taxes.

Are military benefits taxed in Minnesota?


Yes, though Minnesota offers credits and tax relief for military service members, including the Military Pay Subtraction program and the Military Pension Subtraction program.

If you are a military veteran, you may qualify for a credit of up to $750 for your service, depending on length of service and adjusted gross income.

If you are currently serving, you may receive an automatic extension if you cannot file or pay your Minnesota income taxes by the due date. Your duty status and where you are stationed will determine if you qualify.

For more information, visit the Minnesota Department of Revenue’s website’s section for military service members.

What is the deadline for filing Minnesota taxes in 2024?


Minnesota residents must file their 2023 state income tax return by April 15, 2024. The Minnesota Department of Revenue must receive your return electronically or have it delivered or postmarked, by that date. If you owe tax, you must pay it by April 15, even if you file your return later, to avoid penalties and interest.

The deadline for filing federal income tax returns is also April 15, 2024, according to the IRS.

For help estimating your annual income taxes, use AARP’s Tax Calculator.

Also of Interest:

Michelle Tuccitto Sullo is a states writer and editor for AARP. She previously served as managing editor of the Hartford Business Journal in Connecticut and has worked for the New Haven Register, the Connecticut Law Tribune and New Haven Biz.

This story is provided by AARP Minnesota. Visit the AARP Minnesota page for more news, events, and programs affecting retirement, health care, and more.

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