Estate Tax

Estate Tax in Minnesota: Complete Guide 2026

Updated 2026-03-10

Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.

Estate Tax in Minnesota: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed estate planning attorney for your specific situation.

Minnesota imposes a state estate tax with an exemption of approximately $3.00 million, which is higher than Oregon ($1.00 million) and Massachusetts (~$2.00 million) but well below the federal level. Minnesota’s estate tax rates range from approximately ~13.00% to ~16.00%, and the state applies these rates only to the amount above the exemption — there is no cliff provision. With significant real estate values in the Twin Cities metro area and substantial farming operations across the state, Minnesota’s estate tax affects a meaningful number of families.

Minnesota Estate Tax Rates and Exemption (2026)

ParameterProjected 2026 Level
Estate tax exemption~$3.00 million
Lowest marginal rate~13.00%
Highest marginal rate~16.00%

Minnesota Estate Tax Rate Schedule

Taxable Estate (Above Exemption)Tax Rate
$0 — $1,000,000~13.00%
$1,000,001 — $4,000,000~14.00%
$4,000,001 — $7,100,000~15.00%
Over $7,100,000~16.00%

Estimated Tax by Estate Size

Estate ValueEstimated Minnesota Estate Tax
$3,000,000$0
$3,500,000~$65,000
$4,000,000~$130,000
$5,000,000~$270,000
$7,000,000~$550,000
$10,000,000~$1,033,000

Minnesota’s starting rate of ~13.00% is notably high — higher than the lowest bracket in most other states with estate taxes. This means the tax impact is significant even for estates just slightly above the exemption.

Minnesota’s Exemption History

Minnesota has gradually increased its estate tax exemption over the years:

YearExemption
2014~$1.20 million
2016~$1.60 million
2018~$2.40 million
2020~$3.00 million
2026 (projected)~$3.00 million

The exemption was raised to ~$3.00 million as part of a phased increase. However, unlike the federal exemption, Minnesota’s exemption is not indexed for inflation, meaning its real value erodes over time.

How Minnesota Estate Tax Interacts with Federal

Estate SizeFederal TaxMinnesota TaxCombined
$3.5 million$0~$65,000~$65,000
$5.0 million$0~$270,000~$270,000
$7.0 million$0 (if under federal exemption)~$550,000~$550,000
$15.0 millionDepends on federal exemption~$1,833,000Depends

For most Minnesota estates, the state estate tax is the primary concern since the federal exemption is much higher. Estates large enough to trigger both taxes face a combined marginal rate approaching ~56% at the top brackets.

Special Considerations for Minnesota

Agricultural Property Deduction

Minnesota offers a special deduction for qualified agricultural property, which can reduce the taxable estate by up to approximately ~$6.80 million. This is particularly important for farming families, as farmland and agricultural assets can easily push an estate above the ~$3.00 million threshold even when the family may not consider itself wealthy in liquid terms.

To qualify, the agricultural property must:

  • Have been actively used in farming operations
  • Be passed to qualified heirs who continue farming
  • Meet specific ownership and use requirements

Non-Resident Taxation

Non-residents who own Minnesota real property or tangible personal property located in Minnesota are subject to Minnesota estate tax on that property. The tax is prorated based on the ratio of Minnesota property to the total estate.

Comparison to Neighboring States

StateExemptionTop RateSpecial Features
Minnesota~$3.00 million~16.00%Agricultural deduction
IowaN/A (inheritance tax phasing out)~6.00%Being eliminated
WisconsinNoneN/ANo state estate tax
North DakotaNoneN/ANo state estate tax
South DakotaNoneN/ANo state estate tax

Minnesota is surrounded by states with no estate tax. Wisconsin, North Dakota, and South Dakota all lack state estate or inheritance taxes, creating strong relocation incentives for Minnesota residents with significant estates.

Tips for Minimizing Minnesota Estate Tax

  1. Leverage the agricultural property deduction. Qualifying farming families can deduct up to approximately ~$6.80 million in agricultural property, potentially eliminating the estate tax entirely.

  2. Make lifetime gifts. Minnesota does not impose a state gift tax. Annual exclusion gifts of approximately ~$19,000 per recipient per year (projected 2026) reduce the estate without using any federal exemption.

  3. Use irrevocable trusts. Assets transferred to irrevocable trusts are removed from the taxable estate. This is especially effective for appreciating assets like real estate and business interests.

  4. Maximize the marital deduction. Assets passing to a surviving spouse are exempt. A credit shelter trust preserves the first spouse’s exemption while providing for the survivor.

  5. Consider domicile change. South Dakota and Wisconsin have no estate tax and offer attractive alternatives. A genuine domicile change eliminates Minnesota estate tax on intangible property.

  6. Fund life insurance through an ILIT. Life insurance proceeds owned by an irrevocable life insurance trust are excluded from the taxable estate, potentially keeping the estate below the ~$3.00 million threshold.

Key Takeaways

  • Minnesota’s estate tax exemption is approximately ~$3.00 million with rates from ~13.00% to ~16.00%
  • The exemption is not indexed for inflation, meaning its real value decreases over time
  • Minnesota’s ~13.00% starting rate is among the highest lowest-bracket rates in the nation
  • The agricultural property deduction of up to approximately ~$6.80 million is critical for farming families
  • Surrounding states (Wisconsin, South Dakota, North Dakota) have no estate tax, creating relocation incentives
  • Minnesota does not impose a gift tax, making lifetime gifting an effective strategy

Next Steps