Minnesota taxes all forms of retirement income including Social Security and Railroad Retirement. Instead of making Social Security tax free the state offers residents over 65 a deduction for such income. You will only be eligible for this deduction if the adjusted gross income on your state tax return is less than the amounts set by the state.
If you are a married couple filing jointly and both over 65 you can deduct up to $12,000 in Social Security if you make less than $42,000 a year. If one spouse is over 65, you can deduct up to $12,000 in Social Security payments if you make less than $38,500 a year. If you are single you can deduct $9,600 in Social Security a year if you make less than $33,700 a year. If you are married filing separately you can deduct up to $6,000 in Social Security if you make less than $21,000 a year.
The income listed here is the adjusted gross income that appears on your federal tax return. This income must also be listed on your Minnesota tax return or Form M1. To get the Social Security deduction you will also need to file form M1M as well. All income reported on your federal tax return will have to be reported on your Form M1.
Minnesota Income Taxes
Minnesota has three income tax rates:
A 5.35% rate for married couples filing jointly who make less than $33,770 a year, persons filing head of household who make than less than $28,440 a year, married persons filing separately that make less than $16,890 a year, and singles who make less than $23,100.
A 7.05% rate for married couples filing jointly who make between $33,771 and $134,170 a year, married persons filing separately who make between $16,891 and $67,090 a year, persons filing head of household who make between $28,441 and $114,290 a year, and singles who make between $23,100 and $75,890 a year.
A 7.85% rate for married couples filing jointly that make over $134,170 a year, married persons filing separately who make more than $67,090 a year, persons filing head of household who make more than $114,290 a year, and singles who make more than $75,890 a year.
Some Minnesota counties also charge a local use tax of 0.5% or 1.0% on online purchases. This could be added to your state income taxes.
Long Term Care Insurance Credit
You can get a state income credit equal to 25% of long term care insurance premiums in Minnesota. The maximum amount is $100 for individuals and $200 for married couples. To get the credit you will have to fill out schedules M1LT1 and M1C with your state tax return.
Minnesota Sales Tax
Minnesota charges a 6.875% sales tax on most retail sales in the state. Local governments in Minnesota can charge their own sales taxes so the rate can be higher. The standard sales tax rate in most areas of the state is around 7.75%. There are some areas where it can be as high as 16%. There is a 6.5% sales tax on motor vehicle sales in Minnesota.
Many of your purchases will not be taxable in Minnesota. Clothing, food purchased from grocery stores, tools, prescription drugs, most over the counter drugs, real estate, medical supplies, and most petroleum products do not fall under Minnesota's sales tax. There is an additional 2.5% liquor tax in Minnesota that also covers beer and wine sales. Other services that might be taxed in Minnesota include car towing and trash removal.
Minnesota Property Taxes
Property taxes in Minnesota are collected and assessed by county governments. You will have to contact your county government to learn what your property tax is.
Both homeowners and renters in Minnesota can apply for a property tax refund on their state income tax return. To get the refund your household income must be under $99,240 if you have no dependents. If you have dependents your income must be under $121,140. If you are over 65 your income must be under $124,790.
|Cost of Living Rank:||#33|
|Income Tax:||5.35% - 7.85%|