Overview of Minnesota Taxes
Minnesota has a progressive income tax system with rates that range from 5.35% to 9.85%. Only a few states have a higher top tax rate than Minnesota. On the bright side, there are no local income taxes in the Land of 10,000 Lakes.
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Minnesota Paycheck Calculator
Minnesota Paycheck Quick Facts
- Minnesota income tax: 5.35% - 9.85%
- Median household income: $84,313 (U.S. Census Bureau)
- Number of cities that have local income taxes: 0
How Your Minnesota Paycheck Works
If you’re a Minnesotan, your payroll taxes will include FICA taxes, federal income taxes and Minnesota’s own state taxes. Let’s break down what those taxes are and how much you can expect to pay.
In Minnesota, as in every other state, your employer will withhold 6.2% of your earnings for Social Security taxes and 1.45% of your earnings for Medicare taxes, every pay period. Your employer will match those contributions and the total contribution makes up the FICA taxes. Single filers, heads of household and qualifying widow(er)s with earnings that exceed $200,000 are subject to a 0.9% Medicare surtax. Married couples who file jointly pay this surcharge on all income above $250,000, while married couples filing separately pay it on income over $125,000. Your employer doesn’t match this surtax.
Then there’s the federal income tax. The W-4 form you give your employer indicates things like your marital status and any additional tax withholding you want your employer to take from your paychecks. How much your employer withholds will depend on what you put on your W-4 form, as well as on your earnings. Naturally the size of your paychecks will also depend on your pay frequency. Monthly paychecks will be larger than biweekly paychecks because they cover a longer pay period.
Over the last couple of years, the IRS has altered the W-4. Specifically, the new W-4 removes the use of allowances, along with the option of claiming personal or dependency exemptions. Instead, it uses a five-step process that asks filers to enter personal information, claim dependents and indicate any additional income or jobs.
In addition to the required tax withholding, there are also some voluntary contributions you may want to make. For example, contributions to a 401(k) plan, flexible spending account (FSA) or health savings account (HSA) will all come out of your paychecks. The money you put in these types of accounts is also pre-tax, which means it comes out of your pay before income taxes do. Pre-tax contributions lower your taxable income and may even push you into a lower tax bracket.
Any premiums you have to pay for employer-sponsored health, life or disability insurance will also come from your paychecks. The deductions for employer-sponsored insurance are generally pre-tax.
In Minnesota, your employer will deduct money to put toward your state income taxes. Like federal income taxes, Minnesota income taxes are pay-as-you-go. Money comes out of each of your paychecks throughout the year rather than you getting one giant tax bill in the spring.
As mentioned earlier, Minnesota has one of the highest top tax rates in the country. However, that top rate of 9.85% only applies to a high level of income (more than $171,220 for single filers). And because no Minnesota cities charge local income taxes, you don’t have to worry about getting hit with any other rates.
Minnesota also has a tax form that’s similar to the federal W-4 form, but for Minnesota taxes. It’s called the W4-MN and it’s where you claim allowances and exemptions from state taxes. Though you won't be able to claim allowances on the new federal W-4, workers in Minnesota can use the Form W4-MN to determine their Minnesota withholding allowances. However, you only have to give your employer a W4-MN if one of the following applies to you:
- You claim more than 10 Minnesota withholding allowances.
- You checked Box A or B under Section 2, and you expect your wages to exceed $200 per week.
- Your employer believes you aren't entitled to the number of allowances claimed.
If you ask to have additional Minnesota withholding deducted, you can just give your employer a W-4. The Form W4-MN isn’t necessary.
If you receive supplemental wages like bonuses or commissions, the taxes you pay depend on how your employer disburses supplemental wages. The wages are either taxed at normal Minnesota income tax rates or they’re subject to a flat withholding rate of 6.25%.
A financial advisor can help you understand how taxes fit into your overall financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How You Can Affect Your Minnesota Paycheck
If you want to adjust the size of your paycheck, first look to your W4-MN. You may be able to claim more or fewer allowances to change your paycheck. Remember that claiming more allowances means less withholding (larger paycheck) and fewer allowances means more withholding (smaller paycheck). If you want to make changes to your form, simply fill out a new copy and give it to your employer.
You can also think about boosting your contributions to a 401(k), FSA or HSA to shelter more of your income from taxes. Depending on your employer, you might also be able to stash pre-tax dollars in a commuter benefits plan or 529 college savings plan.
If you are interested in buying property in Minnesota or are looking to refinance, check out our Minnesota mortgage guide for all the information you need on mortgages and rates in the state.
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2016 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics
