In Minnesota, you can inherit any amount without paying tax on it personally, because the state has no inheritance tax. Tax may still be owed, but it falls on the estate before assets are distributed. Minnesota’s estate tax starts at $3 million, and the federal estate tax starts at $15 million in 2026. So the practical answer to how much you can inherit without paying taxes in Minnesota is: everything you receive is tax-free to you, and the estate itself owes nothing unless its total value crosses those thresholds.
You Don’t Pay, the Estate Does
Minnesota repealed its inheritance tax in 1980 and has not brought it back.1Minnesota Department of Revenue. Estate Tax versus Inheritance Tax An inheritance tax would charge you, the recipient, and often at a rate tied to how closely you were related to the person who died. An estate tax works differently. It is calculated on the total value of everything the deceased owned and is paid out of the estate’s own assets before anyone receives their share.
That means the executor or personal representative handles any tax obligation, not the beneficiaries.2Minnesota Department of Revenue. Estate Tax If the estate owes tax, it comes out of what would otherwise be distributed. If the estate is below the taxable threshold, no one pays anything.
Minnesota’s $3 Million Threshold
Minnesota exempts the first $3 million of an estate’s value.3Minnesota House of Representatives. The Minnesota Estate Tax Anything below that owes zero state estate tax. Above it, graduated rates apply only to the portion over $3 million, not to the whole estate. An estate worth $3.5 million, for example, is taxed only on the $500,000 above the exclusion.
The rate schedule for deaths in 2018 and later starts at 13 percent and climbs from there:4Minnesota Office of the Revisor of Statutes. Minnesota Statutes 291.03 – Rates
- Up to $7,100,000: 13 percent
- $7,100,000 to $8,100,000: $923,000 plus 13.6 percent of the excess over $7,100,000
- $8,100,000 to $9,100,000: $1,059,000 plus 14.4 percent of the excess over $8,100,000
- $9,100,000 to $10,100,000: $1,203,000 plus 15.2 percent of the excess over $9,100,000
- Over $10,100,000: $1,355,000 plus 16 percent of the excess over $10,100,000
Those dollar figures refer to the Minnesota taxable estate, meaning the gross estate after deductions.
The Federal $15 Million Exemption
A separate federal estate tax sits on top of the state one, but with a much higher floor. For 2026, the federal basic exclusion is $15 million per individual.5Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Estates below that amount owe no federal tax. Above it, the top federal rate is 40 percent.6Internal Revenue Service. Estate Tax
Because the federal exemption is five times Minnesota’s, most families that owe anything will only face the state tax. A federal return (Form 706) is required when the gross estate plus adjusted taxable gifts exceeds the federal exemption for the year of death. Minnesota may require a state return once the $3 million state threshold is met, even if no federal tax is owed.
What Gets Counted Toward the Estate
Before you can tell whether an estate crosses the $3 million line, you need to know what goes into the total. The gross estate is the fair market value of everything the deceased owned or had certain interests in at death, and it counts assets whether or not they pass through probate. Jointly held property, payable-on-death accounts, and assets in revocable trusts all get added in.
Common items on the tally:
- Real estate at current appraised value, including the family home
- Bank accounts, brokerage accounts, stocks, bonds, and mutual funds
- Retirement accounts such as IRAs and 401(k)s
- Ownership stakes in closely held businesses or partnerships
- Vehicles, jewelry, art, and other personal property
- Life insurance death benefits, in the circumstances described below
Life insurance is often the asset that unexpectedly pushes an estate over the threshold. A death benefit is included in the gross estate if the deceased held any ownership rights, called incidents of ownership, over the policy at death. Ownership rights include the power to change the beneficiary, cancel the policy, borrow against it, or assign it to someone else. Proceeds also count if they are payable to the estate itself, or if the beneficiary is legally required to use them to pay the estate’s debts or taxes.7eCFR. 26 CFR 20.2042-1 – Proceeds of Life Insurance
Deductions That Can Bring an Estate Under the Line
Not everything in the gross estate stays taxable. The Minnesota estate tax return (Form M706) lets the estate subtract several categories of expenses and transfers:8Minnesota Department of Revenue. 2024 Form M706, Estate Tax Return
- Debts and mortgages outstanding at the time of death
- Funeral and burial expenses
- Administrative costs such as legal fees, appraisals, and executor compensation
- The full value of assets left to qualified charities
For an estate hovering just above $3 million, careful documentation of these deductions can eliminate the tax entirely. Executors should keep receipts, invoices, and appraisals to support every deduction on the return.
Spouses Inherit Tax-Free
Both federal and Minnesota law let a person leave an unlimited amount to a surviving spouse without triggering estate tax, provided the surviving spouse is a U.S. citizen. This marital deduction bypasses both the $3 million and $15 million thresholds. It applies whether the assets pass through a will, a trust, or joint tenancy. For a non-citizen surviving spouse, a qualified domestic trust (QDOT) is generally required to get the same treatment.
The marital deduction delays the tax rather than removing it. When the surviving spouse later dies, their estate, including whatever they inherited, is measured against the thresholds in force at that point.
Federal law softens this with portability. If the first spouse to die does not use their full $15 million federal exclusion, the survivor can claim the unused portion, called the deceased spousal unused exclusion (DSUE). Preserving it requires filing a federal Form 706 for the first spouse’s estate, even when no federal tax is owed. Portability can effectively give a married couple up to $30 million of federal shelter. Minnesota does not offer portability. The state’s $3 million exclusion belongs to the individual who died and cannot be transferred, which makes state-level planning matter for couples whose combined assets exceed $3 million.
Income Tax on What You Inherit
Even when no estate tax is owed, inherited property carries a federal income tax feature worth understanding. The cost basis of an inherited asset is generally reset to its fair market value on the date of death.9Internal Revenue Service. Gifts and Inheritances This step-up in basis can sharply reduce capital gains tax when you sell.
Say a parent bought a home for $150,000 and it was worth $400,000 at their death. Your basis is $400,000. Sell it for $410,000 and you owe capital gains tax on $10,000, not on $260,000. The executor may elect an alternate valuation date six months after death, but only if a federal estate tax return is filed.9Internal Revenue Service. Gifts and Inheritances
One exception worth flagging: inherited retirement accounts. IRAs and 401(k)s are included in the gross estate, but the beneficiary who takes distributions from them generally owes ordinary income tax on those withdrawals. That income tax is a separate obligation from any estate tax and applies even when the estate itself owes nothing.
Filing Deadline for the Estate
If you are the personal representative and the estate does cross the $3 million line, the Minnesota estate tax return (Form M706) is due within nine months of the date of death, and any tax owed must be paid by the same deadline.10Internal Revenue Service. Filing Estate and Gift Tax Returns The return goes to the Minnesota Department of Revenue estate tax unit with supporting federal schedules.11Minnesota Department of Revenue. Submitting an Estate Tax Return and Correspondence
A six-month filing extension is available if requested before the original due date, but it extends only the paperwork, not the payment.10Internal Revenue Service. Filing Estate and Gift Tax Returns The estimated tax still has to be paid by the nine-month mark, or interest and penalties start accruing on both the state and federal side.