Minnesota Tax and CPA Services: State, County and City Taxes

Minnesota taxes income through four brackets that are adjusted for inflation every year, gives many Social Security recipients a subtraction, administers a stack of local sales taxes alongside the state's 6.875 percent rate, and launched a statewide paid leave program with premiums collected through the unemployment insurance system. This page explains the rules for residents, retirees, nonresident workers, business owners and employers. We serve Minnesota clients remotely from our Naperville, Illinois office.

Individual income tax

For tax year 2026 the Department of Revenue's published rates and brackets are 5.35, 6.8, 7.85 and 9.85 percent. For a single filer, the 5.35 percent rate applies to taxable income up to $33,310, 6.8 percent from $33,311 to $109,430, 7.85 percent from $109,431 to $203,150, and 9.85 percent above $203,150. For married couples filing jointly, the first three breakpoints are $48,700, $193,480 and $337,930, and head of household filers have breakpoints of $41,010, $164,800 and $270,060. Brackets are recalculated each year for inflation and rounded to the nearest $10, so figures change annually.

Social Security. If Social Security or Railroad Retirement benefits are included in federal adjusted gross income and you meet certain income limits, you may qualify for a subtraction, claimed on Schedule M1M. Beginning with tax year 2023 there are two methods, a simplified method and an alternative method. Under the simplified method for the 2025 return, taxpayers with adjusted gross income below $108,320 (married filing jointly) or $84,490 (single or head of household) can subtract all of their Social Security benefits included in AGI, and the subtraction phases out by 10 percent for each $4,000 of AGI above those levels (each $2,000 above $54,160 for married filing separately). Minnesota has other subtractions, including for age 65 or older or disabled, charitable contributions and military personnel.

Reciprocity. If you are a Minnesota employer and your employee lives in Michigan or North Dakota, you may not be required to withhold Minnesota income tax from their wages; the Department has a withholding fact sheet on reciprocity. For other nonresidents, if you must withhold federal income tax from wages for work performed in Minnesota, you must also withhold Minnesota tax in most cases. Wages include severance pay, equity awards and some nonstatutory deferred compensation. Our multi-state tax service helps with split-state returns, including remote workers and visa holders who moved between Minnesota and a neighboring state such as Wisconsin.

Business taxes

Minnesota imposes a corporation franchise tax and a partnership tax regime, with a pass-through entity (PTE) tax election available. The Department says a PTE tax election must be made by the entity's extended due date, which for a calendar-year filer was September 15, 2026 for the 2025 tax year, and it will not accept late-filed elections. The PTE election is a common way to work around the federal limit on the state and local tax deduction; see SALT deduction and property taxes. The Department's webinars cover who qualifies, how to make the election and how to estimate the tax.

Sales and use tax

To figure the Minnesota sales tax rate, combine the state general rate of 6.875 percent with all applicable local taxes, local special taxes and special taxes, then apply the total to the taxable sales price. The Department of Revenue administers many local sales taxes, which apply to the same items and services as the state tax, and it announces when local taxes start, change or end and publishes rate lookup tools, so businesses should check the rate for each delivery location. Remote sellers must collect and remit Minnesota sales tax if they meet economic nexus thresholds, including more than $100,000 in retail sales shipped to Minnesota. Marketplace providers have their own rules. See sales tax nexus and our sales tax service.

Payroll in Minnesota

• Withholding: register for a tax ID with the Department of Revenue and file withholding; the Department publishes due dates and a nonresidents-working-in-Minnesota guide. See state income tax withholding.
• Unemployment insurance: the Department of Employment and Economic Development sets a taxable wage base each year equal to 60 percent of Minnesota's average annual wage on June 30 of the prior year, and new employers receive an assigned rate based on average rates. Wage detail reports and payments for the quarter are due on the schedule posted on the UI website, for example October 31, 2026 for the third quarter. See state unemployment insurance.
• Paid Leave: premiums are funded by employers and employees and are paid each quarter through the same employer account used for UI wage detail reports. Employers choose how to split the premium, but regardless of size an employer can deduct a maximum of 0.44 percent of an employee's wages, made up of 0.305 percent for medical leave and 0.135 percent for family leave. Employers whose employees are covered by UI generally do not need a new account. See state paid family and medical leave.

Counties, cities and property tax

Local taxes in Minnesota are mostly sales taxes and property taxes. Local sales taxes are administered by the Department of Revenue and can combine city, county and special taxes, so the combined rate differs across the state. Property taxes are assessed and billed locally by local officials. For a bordering state with a different system, see Iowa.

How we can help

We prepare Minnesota resident, part-year and nonresident returns, evaluate Social Security subtractions, advise pass-through entities on the PTE election deadline, and set up Minnesota payroll including Paid Leave premiums. For a notice from the Department of Revenue, see state tax notices and representation. Contact us to begin; this page is general information.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.