Minnesota's Four-Bracket Tax Structure

Minnesota is a progressive income tax state — one of the few in the Midwest that still operates a full four-bracket schedule rather than a flat or simplified rate. The four rates — 5.35%, 6.80%, 7.85%, and 9.85% — have been in place for years, with only the income thresholds adjusting annually for inflation. For 2026, those thresholds rose by 2.369%, as the Minnesota Department of Revenue announced in December 2025. This automatic adjustment, required by state law since 1979, prevents bracket creep: workers whose wages rise only with inflation don't get pushed into higher brackets.

For most Minnesota workers earning between $34,000 and $109,000 in taxable income, the relevant bracket is 6.80% — the second tier. Workers earning above $109,430 in MN taxable income face the 7.85% bracket on that excess. Only high earners above $203,150 in MN taxable income reach the 9.85% top rate. Because Minnesota's state standard deduction ($15,300 for Single filers in 2026) reduces the taxable base, the effective rate a typical worker pays is meaningfully lower than the marginal rate.

Minnesota 2026 Income Tax Brackets — All Filing Statuses

The four rates are identical for all filing statuses — only the income thresholds differ. These figures are sourced directly from the Minnesota Department of Revenue's December 16, 2025 press release and apply to Minnesota taxable income (gross wages minus the MN standard deduction):

These brackets apply to Minnesota taxable income — not to gross wages. After subtracting the $15,300 state standard deduction, a Single filer earning $70,000 has $54,700 in MN taxable income. That falls entirely within the first two brackets: $33,310 taxed at 5.35% and $21,390 taxed at 6.80%.

Minnesota Standard Deduction 2026 — and the High-Income Phase-Out

Minnesota's 2026 standard deduction amounts — announced by the Department of Revenue alongside the bracket adjustments — are larger than many filers expect, reducing MN taxable income significantly for most wage earners:

Minnesota's 1% Net Investment Income Surtax

On top of the four-bracket income tax, Minnesota enacted a 1% surtax on net investment income exceeding $1 million for individuals, estates, and trusts. This provision — quietly embedded in Minnesota's 2023 omnibus tax bill — makes Minnesota one of only a handful of states to separately tax investment income above the ordinary income tax.

The $1 million threshold is not indexed for inflation. Net investment income includes interest, dividends, capital gains, rents, royalties, and passive activity income — defined similarly to the federal Net Investment Income Tax (NIIT) under IRC §1411. For most W-2 wage earners, this surtax is irrelevant. For business owners receiving pass-through income, real estate investors, and stock-heavy earners, it is a meaningful additional levy.

Minnesota vs Midwest Neighbors — $70,000 Take-Home

Minnesota's high rates stand out sharply against its neighbors, several of which have reduced rates significantly in recent years. Here is how a Single filer earning $70,000 compares across the region in 2026:

At $70,000, Minnesota's state tax burden of $3,237 is among the highest in the Midwest — exceeded regionally only by Wisconsin ($3,080 is actually less) and Illinois ($3,195 is slightly less). The gap between Minnesota and no-tax South Dakota is $3,237 per year — about $270 per month — a figure that grows steeply at higher incomes. A Minnesotan earning $150,000 faces roughly $10,800 in state income tax; the same earner in South Dakota pays zero.

2026 Federal Tax Brackets for Minnesota Workers

Federal income tax applies uniformly to all Minnesota employees, calculated entirely independently from the state return. The 2026 federal standard deduction — raised to $16,100 Single / $32,200 MFJ / $24,150 HOH under the One Big Beautiful Bill Act (OBBBA) — applies before federal brackets. Brackets for Single filers, per IRS Rev. Proc. 2025-32:

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