Minnesota State Taxes

State Taxes at a Glance – Minnesota

State Income Taxes in Minnesota

The state of Minnesota does have an individual income tax. Like most states with income tax, it is calculated on a marginal scale, with four (4) tax brackets. They range from 5.35% to 9.85%. The highest bracket of 9.85% starts for income greater than $183,340.

State Business Taxes in Minnesota

The state of Minnesota does have a business income tax. Minnesota’s state tax is a flat tax of 9.80% on all net income. For business entities, such as S Corporations, Partnerships, LLCs, etc., since they flow-thru to the owner, the tax is paid at the individual tax rate. In other words, the business tax is only accessed on C Corporations.

In addition to a business tax on C Corporations, all business entities must also pay a Minimum Fee. The fee is based on your Business’ Apportionment which are the values of: Property, Capitalized Rents, Payroll, and Gross Receipts all added together. The Minimum Fee ranges between $0 and $10,810, based on the value of your Apportionment.

Here is a link to the Minimum Fee Tax Brackets – Click Here.

Sales and Property Taxes in Minnesota

Sales Taxes – Like many states, Minnesota has multiple sales tax rates. One at the state level and another at the local level. The state rate is 6.875% the average local rate is 0.61% (total average rate for Minnesota Sales Tax is 7.49%). Note: groceries and clothing are exempt from sales tax in Minnesota.

Property Taxes in Minnesota – the average property tax rate for residential property in the state of Minnesota is 1.10, which is a high property tax as far as a percent of a taxpayer’s main home.

Homestead Exclusion – Minnesota does have a property tax exclusion if you homestead your property. If you want to learn more about Minnesota Homestead, click here.

Estate Taxes in Minnesota

The state of Minnesota has an estate tax that ranges between 13% and 16%. The first $3 Million dollars of the estate is exempt from tax.

Minnesota DMV Taxes

Minnesota’s DMV fees are a tax which means it’s deductible on your personal tax return. You may learn more about your Minnesota’s DMV taxes here.

Minnesota Domicile

Minnesota’s presumption is that it’s your domicile if you’ve lived there for over 183 months and that you also own, rent, maintain or occupy a home there.

State Tax on Social Security Benefits

Minnesota is one of the few states in the union that assesses state tax on social security benefits. It’s actually one of two states that uses the Federal rules to calculate how much is taxable (the other state is Utah.)

Payroll taxes in Minnesota

Payroll (Unemployment Insurance) taxes are paid by business on the behalf of their employees to fund unemployment insurance to the state. It consists of multiple factors. Below is an outline of the most common ones in Minnesota –

• Wage Base – Minnesota’s wage base is $40,000 (which is very high).
• New Employers – UI Contribution Tax rates change yearly and are based on the industry that your business is in. Here is a link to the list of possible UI rates for new employers in the state of Minnesota – Click here.
• UI Rates – range from 0.20% to 9.46%

Minnesota Business Entities – LLCs

Minnesota has an inexpensive cost of opening an LLC. Here are some important facts:

• Minnesota does not have any annual LLC fee, Yay!
• When youregister with the state, you pay a one time fee of $155
• Secretary of State of Minnesota – click here

Minnesota Tax Phone Numbers

Important phone numbers for the Minnesota Department of Taxation:

• Website: www.revenue.state.mn.us
• Phone# for Individuals – (651) 296-3781
• Phone# for Businesses – (651) 282-5225