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Official Tax Guide

Minnesota Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to Minnesota state taxes. Income tax (5.35% - 9.85%), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

State Tax Guide 2025: Minnesota

Moving to Minnesota? Understanding the state's tax structure is essential for financial planning. This guide provides an overview of Minnesota's income, sales, and property taxes for 2025, helping you navigate your new financial landscape.

1. Income Tax

Minnesota utilizes a progressive income tax system with multiple brackets. This means your tax rate increases as your income rises. The rates for 2025 are structured as follows:

  • Tax Brackets: The state has several brackets, with rates ranging from 5.35% to 9.85%.
  • Filing Status: The brackets differ depending on your filing status (e.g., single, married filing jointly, head of household).
  • Progressive Nature: Unlike a flat tax system where everyone pays the same rate, Minnesota's system is designed so that higher earners pay a higher percentage of their income in state taxes.

2. Sales Tax

The statewide sales tax rate in Minnesota is 6.875%.

  • Local Taxes: It's important to note that this is the base state rate. Counties and cities can levy additional local sales taxes, which can increase the total sales tax you pay at the register. The actual rate you pay will depend on your specific location within the state.
  • Taxable Items: Most retail goods and many services are subject to sales tax. However, some items, like clothing (up to a certain price point) and groceries, may be exempt or taxed at a lower rate.

3. Property Tax

Property taxes in Minnesota are primarily determined at the local level by counties, cities, and school districts.

  • Assessment: Taxes are based on the market value of your property as determined by the county assessor.
  • Rates: While Minnesota's property tax rates are generally around the national median, the actual amount you pay can vary significantly depending on your location and the local tax levies in place.
  • Homestead Benefit: If the property is your primary residence, you may be eligible for a homestead benefit, which can reduce your taxable property value.

4. Other Taxes

Beyond income and sales tax, Minnesota levies several other taxes you should be aware of:

  • Gas Tax: Minnesota imposes a tax on gasoline and diesel fuel. This is included in the price per gallon at the pump.
  • "Sin" Taxes: The state has higher excise taxes on products like alcohol and tobacco.
  • Inheritance Tax: Minnesota is one of the few states that has a state-level inheritance tax. However, it applies only to estates exceeding a certain threshold, and immediate family members (like spouses and children) are often exempt.
  • Corporate Income Tax: Minnesota has a corporate franchise tax with rates that vary based on taxable income.

5. Retiree Taxes

Minnesota is generally considered a tax-friendly state for retirees, but there are nuances:

  • Social Security: Social Security benefits are exempt from Minnesota state income tax for most retirees. However, if your federal adjusted gross income (AGI) exceeds a certain threshold, a portion of your benefits may be taxable.
  • Retirement Accounts: Withdrawals from retirement accounts like 401(k)s and traditional IRAs are generally taxable as ordinary income.
  • Pensions: Most pension income is also taxable in Minnesota.
  • Other Income: The state does not tax income from Railroad Retirement benefits.

6. Comparison to Neighboring States

Minnesota's tax structure differs from its neighbors:

  • North Dakota & South Dakota: Both neighbors have no state income tax, making them more attractive for that specific tax burden. However, South Dakota has a higher average sales tax rate.
  • Wisconsin: Wisconsin also has a progressive income tax system, but its top rate is generally lower than Minnesota's.
  • Iowa: Iowa has a progressive income tax but is in the process of simplifying its system, with plans to move toward a flat tax rate in the coming years.

Disclaimer: Tax laws and rates are subject to change. This guide is for informational purposes only and is not a substitute for professional tax advice. Please consult with a qualified CPA or tax professional for advice tailored to your specific financial situation.