Yes, Minnesota does tax pensions. If a distribution from a 401(k), traditional IRA, or employer pension plan is taxable on your federal return, it flows into your Minnesota return at the same value and is taxed at rates between 5.35% and 9.85%.1Minnesota Office of the Revisor of Statutes. Minnesota Code 290.01 – Definitions The state carves out subtractions for a handful of specific groups: military retirees, certain public employees whose jobs were not covered by Social Security, foreign service retirees, and Social Security recipients under income thresholds. Private-sector pensioners who don’t fit one of those categories pay full freight.
How the Tax Is Calculated
Minnesota’s individual income tax starts with your federal adjusted gross income, then applies state-specific additions and subtractions.1Minnesota Office of the Revisor of Statutes. Minnesota Code 290.01 – Definitions Any pension distribution the IRS treats as taxable enters your Minnesota calculation at full value unless a targeted subtraction knocks it down. Qualified Roth IRA and Roth 401(k) distributions, which are excluded from federal AGI in the first place, never show up on your Minnesota return at all.
Once your income is set, Minnesota applies four progressive brackets. For tax year 2026:2Minnesota Department of Revenue. Income Tax Rates and Brackets
- 5.35% on the first $48,700 (married filing jointly) or $33,310 (single)
- 6.80% on income up to $193,480 (joint) or $109,430 (single)
- 7.85% on income up to $337,930 (joint) or $203,150 (single)
- 9.85% on everything above those top thresholds
A retiree pulling $60,000 a year from a corporate pension and a traditional IRA, with no other income, owes Minnesota tax on the whole amount after standard deductions. There is no general pension subtraction for private retirement income. The relief that does exist is narrow, and it’s covered below.
Military Retirement Pay
Military retirees get the cleanest deal in Minnesota. The state allows a full subtraction of qualifying military pension income with no dollar cap.3Minnesota Department of Revenue. Military Pension Subtraction Qualifying income includes active-duty retirement pay computed under Title 10 of the U.S. Code, sections 1401 through 1414; reserve component retirement pay under Title 10, section 12733; and survivor benefit plan payments under Title 10, sections 1447 through 1455, including payments to a former spouse under a divorce order.
Two limits apply. If you claim the military pension subtraction, you cannot also claim the nonrefundable Credit for Past Military Service on Schedule M1C.4Minnesota Department of Revenue. 2025 Schedule M1M, Income Additions and Subtractions And pensions earned exclusively from service as a dual-status military technician do not qualify.3Minnesota Department of Revenue. Military Pension Subtraction
Public Pension Subtraction for Non-Social-Security Jobs
Minnesota offers a separate subtraction for retirees whose public service jobs did not earn Social Security credits. This covers many state and local employees, including police officers, firefighters, and certain federal workers.5Minnesota Department of Revenue. Revenue Notice 24-02 – Qualified Retirement Benefits Subtraction – Allocation The pension is often their only retirement income, and the subtraction partially offsets that.
The base maximum is $25,000 for married couples filing jointly and $12,500 for all other filers, adjusted for inflation each year.5Minnesota Department of Revenue. Revenue Notice 24-02 – Qualified Retirement Benefits Subtraction – Allocation For tax year 2025 the inflation-adjusted caps are $27,080 (joint) and $13,540 (all others). The subtraction phases out at higher income levels and is calculated on Schedule M1QPEN.4Minnesota Department of Revenue. 2025 Schedule M1M, Income Additions and Subtractions
Eligibility turns on one requirement: the pension must come from public employment where you did not earn credit toward Social Security benefits. If your government job was covered by Social Security, this subtraction does not apply to that pension. Survivor beneficiaries can qualify if the original member’s service met the requirement.
Foreign Service Retirement
Pension income from the Foreign Service Retirement and Disability System or the Foreign Service Pension System under Title 22 of the U.S. Code is subtractable.4Minnesota Department of Revenue. 2025 Schedule M1M, Income Additions and Subtractions If your federal career combined foreign service with other government roles, you can subtract only the portion attributable to foreign service, and a worksheet on Schedule M1M walks through the allocation.
Social Security Benefits
Social Security is a separate income stream, but most people asking about pension tax want to know about it too. Minnesota expanded its Social Security subtraction significantly in 2023, and the current rules make benefits effectively tax-free for most recipients below certain income levels.6Minnesota House of Representatives. Taxation of Social Security Benefits in Minnesota
The subtraction works through two methods, and you take whichever gives you more.7Minnesota Office of the Revisor of Statutes. Minnesota Code 290.0132 – Income Subtractions Under the simplified method, if your adjusted gross income is at or below $108,320 (joint) or $84,490 (single or head of household), you can subtract all of your federally taxable Social Security benefits.8Minnesota Department of Revenue. Social Security Benefit Subtraction Above those thresholds the subtraction drops by 10% for each $4,000 of income over the limit, and a joint-filing couple with AGI of $148,320 or more loses the simplified subtraction entirely. Those are the 2025 figures and will adjust slightly for 2026.
Taxpayers over the simplified cutoffs can try an alternative calculation based on provisional income. The maximum alternative subtraction is $5,840 for joint filers and $4,560 for single or head-of-household filers, reduced by 20% of provisional income above $88,630 (joint) or $69,250 (single).7Minnesota Office of the Revisor of Statutes. Minnesota Code 290.0132 – Income Subtractions It helps a narrow band of higher-income retirees.
If You Move Out of Minnesota
Residency controls whether Minnesota can tax your pension. As a full-year resident you owe Minnesota tax on all pension income no matter where the job was.9Minnesota Department of Revenue. Tax Information for Seniors If you move partway through the year, Minnesota can only tax the pension payments you received while you were a resident.
Once you’ve fully established residency somewhere else, federal law takes over. Under 4 U.S.C. ยง 114, no state can tax the retirement income of a person who is neither a resident nor a domiciliary.10Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income The protection covers 401(k) distributions, IRAs, 403(b) accounts, governmental 457 plans, and military retired pay, among others. The practical consequence: if you move to a no-income-tax state, Minnesota cannot chase your pension across the border. But if you keep a Minnesota home, hold a Minnesota driver’s license, or spend substantial time in the state, the Department of Revenue may still treat you as a resident.
Withholding and Estimated Payments
Pension administrators usually withhold federal tax automatically; state withholding is a separate matter. If your payer does not withhold Minnesota tax and you don’t submit a Form W-4MNP asking it to, you may owe quarterly estimated payments. Minnesota requires estimated tax if you expect to owe $500 or more after withholding and refundable credits, and the Department of Revenue lists pension income as a common trigger.11Minnesota Department of Revenue. Estimated Tax The simplest fix is to call your pension administrator and set up Minnesota withholding at a level that covers your expected bill.
Where It Goes on Your Return
Pension income flows onto Form M1 through your federal AGI.12Minnesota Department of Revenue. 2025 Form M1 Individual Income Tax Subtractions are claimed on Schedule M1M:
- Line 25 for military pension or retirement pay
- Line 29 for the qualified public pension subtraction (requires Schedule M1QPEN)
- Line 36 for the foreign service retirement subtraction
Social Security subtractions appear on the same schedule.4Minnesota Department of Revenue. 2025 Schedule M1M, Income Additions and Subtractions Any Minnesota tax withheld from your pension goes on Schedule M1W, pulled from your Form 1099-R.12Minnesota Department of Revenue. 2025 Form M1 Individual Income Tax Keep each 1099-R; the Department of Revenue may ask you to verify the pension types you reported and the subtractions you claimed.