Does Minnesota Tax Social Security and Retirement Income?

Social Security is subtracted in full below an income threshold, then phased out

Minnesota starts from federal adjusted gross income, which includes the taxable part of Social Security, and then allows a subtraction on line 12 of Schedule M1M. Since tax year 2023 there have been two ways to compute it, a simplified method and an alternative method, and the taxpayer claims the larger. For 2025 the simplified method’s income levels were $108,320 for a joint return and $84,490 for single and head of household filers. (Minnesota Department of Revenue: Social Security Benefit Subtraction)

For tax year 2026 the simplified method’s thresholds, which are indexed each year, are $110,780 for married couples filing jointly and surviving spouses, $86,410 for single and head of household filers, and $55,390 for married filing separately. The alternate method’s maximum of $5,840 joint or $4,560 single is not indexed. (Minnesota Department of Revenue, Tax Year 2026 Inflation-Adjusted Amounts in Minnesota Statutes (December 1, 2025))

Under the simplified method a taxpayer at or below the threshold subtracts every dollar of taxable benefits. Above it, the subtraction is reduced by ten percent for each $4,000 of adjusted gross income, or fraction of $4,000, over the threshold. The alternate subtraction is the lesser of taxable benefits or a fixed maximum, which is reduced by 20 percent of provisional income over $88,630 on a joint return or $69,250 for a single filer. (Minnesota Statutes 290.0132, Individuals; subtractions (subd. 26 Social Security benefits, subd. 34 qualified retirement benefits))

The worksheet rounds the number of $4,000 steps up to the next whole number and stops at ten, so nothing is left once AGI is more than $36,000 above the threshold: $146,780 on a joint return and $122,410 for a single filer in 2026. Railroad Retirement Board benefits are subtracted separately on line 17. (Minnesota Department of Revenue, 2025 Schedule M1M, Income Additions and Subtractions, with instructions and the Worksheet for Line 12)

Our example households land in three different places. The single retiree’s AGI of $70,500 is under $86,410, so all $25,500 of taxable benefits is subtracted. The first couple’s AGI of $136,750 is $25,970 over the joint threshold, which is seven steps: they lose 70% and subtract $14,025 of their $46,750. The second couple, at $279,500, receive no subtraction. (Minnesota Department of Revenue, 2025 Schedule M1M, Income Additions and Subtractions, with instructions and the Worksheet for Line 12)

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Private pensions are fully taxed; military pay is exempt and some public pensions get a limited subtraction

Pensions received while a Minnesota resident are taxable by Minnesota regardless of where they were earned, federal pensions included, and there is no general exclusion for private-employer plans. Since 2022 payers have had to withhold Minnesota income tax from pension distributions unless the recipient asks them not to. (Minnesota Department of Revenue: Seniors (Income Tax Fact Sheet 6))

The qualified public pension subtraction, claimed on Schedule M1QPEN, is narrow. It covers only pension or survivor payments based on service that did not earn Social Security credit, such as basic members of PERA and the teachers’ plans, the police and fire and State Patrol plans, and federal plans without Social Security coverage. For 2025 the maximum was $27,080 on a joint return and $13,540 for other filers, and nothing was allowed above AGI of $127,319 (joint) or $103,489 (single). (Minnesota Department of Revenue: Qualified Public Pension Subtraction)

For 2026 the maximum public pension subtraction is $27,690 for a joint return and $13,850 for other filers, and it begins to phase out at the same AGI thresholds as the Social Security subtraction, $110,780 and $86,410. (Minnesota Department of Revenue, Tax Year 2026 Inflation-Adjusted Amounts in Minnesota Statutes (December 1, 2025))

By statute the public pension subtraction is reduced by ten percent for each $2,000 of AGI, or fraction of $2,000, above the threshold, twice as fast as the Social Security phase-out. (Minnesota Statutes 290.0132, Individuals; subtractions (subd. 26 Social Security benefits, subd. 34 qualified retirement benefits))

Military retirement pay is not taxed. Retired pay for active or reserve service under Title 10, and Survivor Benefit Plan payments, are subtracted on Schedule M1M to the extent they are in federal AGI. A person who takes the subtraction cannot also claim the Credit for Past Military Service. (Minnesota Department of Revenue: Military Pension Subtraction)

IRA and 401(k) withdrawals and Roth conversions are taxed as ordinary income

Form M1 begins with federal adjusted gross income, and Schedule M1M has no subtraction for IRA distributions, 401(k) withdrawals or private annuities. Whatever is taxable on the federal return is taxable in Minnesota at 5.35% to 9.85%. (Minnesota Department of Revenue, 2025 Schedule M1M, Income Additions and Subtractions, with instructions and the Worksheet for Line 12)

A Roth conversion adds to AGI, the figure the Social Security subtraction is measured against, so it can be taxed twice over: once on the converted amount and again through a smaller subtraction. If the first example couple converted $10,000, their AGI would rise to $146,750, nine steps over the threshold instead of seven, and their subtraction would fall from $14,025 to $4,675. Taxable income would rise by $19,350, costing about $1,316 at the 6.8% rate. (Minnesota Statutes 290.0132, Individuals; subtractions (subd. 26 Social Security benefits, subd. 34 qualified retirement benefits))

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest, dividends and capital gains are taxed at ordinary rates, with a 1% surtax above $1 million

Minnesota has no lower rate for long-term capital gains or qualified dividends; they are taxed through the same rate schedule as a pension. Interest and mutual fund dividends attributable to U.S. Treasury bonds, bills, notes and savings bonds are subtracted on Schedule M1M, but interest from Ginnie Mae, Fannie Mae and Freddie Mac securities is not. (Minnesota Department of Revenue: Seniors (Income Tax Fact Sheet 6))

Interest on other states’ municipal bonds, exempt on the federal return, must be added back. For a mutual fund, if at least 95% of its federally exempt dividends came from Minnesota bonds, only the portion from other states is added; below 95%, all of the fund’s exempt dividends are added. (Minnesota Department of Revenue: Seniors (Income Tax Fact Sheet 6))

On top of the regular tax, individuals, estates and trusts pay 1% on net investment income above $1,000,000. Net investment income has the federal meaning in section 1411(c) of the Internal Revenue Code, the definition used for the 3.8% federal tax, except that Minnesota leaves out net gain on property classified as class 2a agricultural land. (Minnesota Statutes 290.033, Net investment income tax)

Minnesota has four rates: 5.35%, 6.8%, 7.85% and 9.85%. The brackets are indexed every year and rose 2.369% for tax year 2026. On a joint return the 6.8% rate begins at $48,701 of taxable income, 7.85% at $193,481 and 9.85% at $337,931. (Minnesota Department of Revenue: income tax brackets, standard deduction and dependent exemption amounts for tax year 2026 (December 16, 2025))

The 2026 standard deduction is $30,600 for married couples filing jointly, $15,300 for single filers and $23,000 for heads of household. A person 65 or older adds $2,000 if single or head of household and $1,600 if married, so a couple who are both 65 deduct $33,800. There is no personal exemption for the taxpayer or spouse; the $5,300 exemption is for dependents only. (Minnesota Department of Revenue, Tax Year 2026 Inflation-Adjusted Amounts in Minnesota Statutes (December 1, 2025))

The standard deduction is reduced at higher incomes, which the bracket table cannot show. By statute the reduction is 3% of AGI above a first threshold up to a second threshold, plus 10% of AGI above the second, and never more than 80% of the deduction. For 2026 the thresholds are $244,400 and $337,800, and above $1,107,750 the deduction is cut by the full 80%. The couple in our third example, with AGI of $279,500, lose $1,053 of their $33,800. (Minnesota Statutes 290.0123, Standard deduction (subd. 5, deduction limited))

Minnesota’s deductions are its own. The Department of Revenue’s 2026 desk reference shows the $6,000 federal deduction for each taxpayer 65 and older on the federal line only; the Minnesota line shows $15,300 or $30,600 with additional amounts of $2,000 and $1,600. (Minnesota Department of Revenue, Tax Year 2026 Tax Professional Desk Reference Chart)

Married couples filing jointly may qualify for the marriage credit on Schedule M1MA when both spouses have taxable earned income, pensions or Social Security. The Department’s final draft of the 2026 schedule, dated October 1, 2026, requires joint taxable income of at least $49,000 and at least $31,000 of such income for the lesser-earning spouse. Below $125,000 of lesser-spouse income the credit is read from a table; above that it is computed on the schedule and capped at $1,894. The schedule counts the Social Security taxed on the federal return (Form 1040, line 6b), split between the spouses by their benefits, without reducing it for the Minnesota subtraction. The examples on this page use that table: $26 for the first couple and nothing for the second. (Minnesota Department of Revenue, 2026 Schedule M1MA, Marriage Credit, with instructions and the Table for Line 8 (final draft, October 1, 2026))

The additional standard deduction at 65 is the only age-based break that reaches most retirees: $2,000 for a single filer or head of household and $1,600 for each married spouse in 2026. A couple who are both 65 add $3,200, worth about $218 at the 6.8% rate. (Minnesota Department of Revenue, Tax Year 2026 Inflation-Adjusted Amounts in Minnesota Statutes (December 1, 2025))

The subtraction for people 65 or older or disabled (Schedule M1R) is aimed at low incomes. For 2025 it required income under $33,700 for a single filer or $42,000 for a joint return with both spouses qualifying, and nontaxable Social Security and Railroad Retirement benefits under $9,600 (single) or $12,000 (joint). (Minnesota Department of Revenue, 2025 Form M1 Individual Income Tax instructions)

Premiums for long-term care insurance can earn a nonrefundable credit of up to $100 per person on Schedule M1LTI, to the extent no federal tax benefit was received for them. (Minnesota Department of Revenue: Seniors (Income Tax Fact Sheet 6))

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from Minnesota's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which is the same wherever they live. The tax bracket calculator and the guide to taxes in retirement cover that side.

Property tax is levied by counties, cities, townships and school districts. For comparison across states, Tax Foundation figures drawn from Census data put Minnesota property taxes at 1.00% of owner-occupied home value in 2024, 17th highest among the states. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figures from Census ACS data))

Minnesota’s main relief is a refund paid by the state. The Homestead Credit Refund has a regular version, based on household income and the property tax bill, and a special version, with no income limit, for homeowners whose net tax rose by more than 12% and at least $100 in a year. The regular refund for 2025 required household income under $142,490, and a law change raised 2025 homeowner refunds by nearly 15%. (Minnesota Department of Revenue: Homeowner’s Homestead Credit Refund)

The refund schedule published in December 2025, before that increase, set a maximum regular refund of $3,480 at household incomes up to $52,719, stepping down to $680 just below the cutoff. The same document sets the 2026 Renter’s Credit schedule, which pays up to $2,780 and ends at household income of $79,330. (Minnesota Department of Revenue, Tax Year 2026 Inflation-Adjusted Amounts in Minnesota Statutes (December 1, 2025))

The state general sales tax rate is 6.875%, and local taxes are added by address. The seven Twin Cities metropolitan counties carry a further 1.00% in metro-area taxes for housing and transportation, and the combined rate in the last quarter of 2026 is 9.025% in Minneapolis, 9.875% in St. Paul and 8.125% in Rochester. (Minnesota Department of Revenue, Local Sales and Use Tax Rate Guide, effective October 1 to December 31, 2026)

Clothing for general use, food bought as groceries, and both prescription and over-the-counter drugs for people are exempt from sales tax by law, each with taxable exceptions listed in the department’s fact sheets. (Minnesota Department of Revenue, Sales Tax Guide: Nontaxable Sales (clothing, food, drugs))

As a comparative figure, the Tax Foundation ranks Minnesota’s 6.875% state rate 6th highest in the country and puts the average combined state and local rate at 8.14% as of January 1, 2026, 15th highest, with an average local rate of 1.26%. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figures))

Minnesota taxes estates well below the federal threshold. A return on Form M706 is required when the federal gross estate plus federal adjusted taxable gifts made within three years of death exceeds $3,000,000, the figure that has applied since 2020. The federal filing threshold for 2026 is $15,000,000. (Minnesota Department of Revenue: Estate Tax Filing Requirement)

The $3,000,000 exclusion is a subtraction from the Minnesota taxable estate, and qualified small business and farm property can lift the total subtraction to as much as $5,000,000. Taxable gifts made within three years of death are added back. (Minnesota Statutes 291.016, Minnesota taxable estate)

The rate schedule applies to what is left after the subtraction: 13% on the first $7,100,000, rising in steps to 16% above $10,100,000. An unmarried resident with a $5,000,000 taxable estate would have a Minnesota taxable estate of $2,000,000 and tax of $260,000. For a nonresident the tax is multiplied by the share of the estate located in Minnesota. (Minnesota Statutes 291.03, Rates)

The exclusion is not portable between spouses: the Department of Revenue’s January 2025 analysis of a bill that would have added portability states that it is not available under Minnesota law. A couple who leave everything to the survivor use only one $3,000,000 exclusion. (Minnesota Department of Revenue, Analysis of S.F. 30, Estate Tax: Portability for Unused Exclusion (January 22, 2025))

There is no inheritance tax; Minnesota repealed it starting in 1980. Withdrawals from inherited pre-tax IRAs and annuities are taxed as income by the state where the beneficiary lives. (Minnesota Department of Revenue: Estate Tax versus Inheritance Tax)

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

The 2026 omnibus tax law (Session Laws 2026, chapter 128) updated Minnesota’s reference to the Internal Revenue Code to May 1, 2026, adopting the July 2025 federal law with modifications. For individuals the main one is a floor on charitable deductions of 1% of the contribution base from tax year 2026, double the federal 0.5%. The law also directs the state to build a free direct-filing system for tax years beginning after December 31, 2026. (Minnesota Department of Revenue, Analysis of Session Laws 2026, Chapter 128 (H.F. 2438), Omnibus Tax Bill (May 26, 2026))

Brackets, the standard deduction and the Social Security and public pension thresholds are re-indexed every year. The department’s 2026 desk reference notes that the 2027 brackets will be available in December 2026. (Minnesota Department of Revenue, Tax Year 2026 Tax Professional Desk Reference Chart)

Minnesota treats a person as a resident in two ways. The first is domicile, the place a person intends to make home permanently or indefinitely; once established in Minnesota it continues until the person takes action to change it. No single factor decides it; the department weighs where time is spent, where a spouse and family live, the homes kept, the driver’s license and voter registration. (Minnesota Department of Revenue: Domicile (Residency) for Individuals)

The second is the 183-day rule, which catches people domiciled elsewhere. A person who spends at least 183 days in Minnesota during the year, counting any part of a day as a full day, and who (or whose spouse) rents, owns, maintains or occupies a residence suitable for year-round use with its own cooking and bathing facilities, is taxed as a Minnesota resident. Residents of Michigan and North Dakota and military members stationed in Minnesota are excepted. (Minnesota Department of Revenue: 183-Day Rule)

Someone who moves in or out and establishes a new domicile is a part-year resident and files Form M1 with Schedule M1NR. A person who leaves must actually establish a permanent residence elsewhere; temporary absences do not change residency. (Minnesota Department of Revenue: Part-Year Residents)

Federal law (4 U.S.C. 114) bars a state from taxing the retirement income of a non-resident. A pension or 401(k) built during a Minnesota career is therefore taxed only by the state where the retiree lives when it is paid. (4 U.S.C. 114, Limitation on State income taxation of certain pension income)