Minnesota is in the top 10 for marginal state individual income tax rate

Minnesota is surrounded by states with lower top marginal state individual income tax rates.

The Gopher State's 9.85% rate is higher than the rates in all but five other states: California (13.3%), Hawaii (11%), New York (10.9%), New Jersey (10.75%) and Oregon (9.9%). Washington, D.C., also has a top rate of 10.75%, according to a new report from Tax Foundation.

Like most states, Minnesota has a graduated-rate income tax.

From at least as far back as 2015 to Jan. 1 of this year, Minnesota has four income tax brackets, the report said. The rates for single filers are 5.35% for those who make up to $30,070, 6.80% for those who make up to $98,760, 7.85% for those who make up to $183,340 and 9.85% for those who make more than $183,340. Married couples filing jointly pay 5.35% if they earn less than $43,950, 6.8% if they earn between $43,950 and $174,610, 7.85% if they make between $174,610 and $304,970, and 9.85% if they make more than $304,970.

Standard deductions, personal exemptions and bracket levels are adjusted annually for inflation.

In 2023, the personal exemption for dependents is $4,800 and the standard deductions are $13,825 for single filers and $27,650 for married couples filing jointly.

The standard deduction for Minnesota taxpayers who earn adjusted gross income of more than $206,050 (or $103,025 if they’re married and file separately) is either 80% of the standard deduction or 3% of the excess of the taxpayer’s federal adjusted gross income over the applicable amount, whichever is lesser.

Gov. Tim Walz and Lieutenant Gov. Peggy Flanagan have proposed this year a 1.5% surcharge on capital gains and dividends of individuals, trusts and estates between $500,000 and $1 million and 4% on income over $1 million for individuals, trusts and estates.

Among the North Star State’s neighbors, Wisconsin has the next-highest tax rate, 7.65%, for the top earners. Iowa has a 6% rate, and North Dakota has a 2.9% rate. South Dakota is one of the seven states in the nation that have no income tax.

The report excludes local income taxes, which 11 states currently collect. Minnesota doesn’t have this type of tax, according to the report. Iowa’s average local income tax is 0.11%.

Minnesota does, however, enforce the second-highest corporate income tax.

With 12 graduated-rate income tax brackets, Hawaii has the most of any state.

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