If you live in Wisconsin and work in Minnesota, taxes get split between the two states: Minnesota taxes the wages you earn inside its borders through a nonresident return, and Wisconsin taxes you as a resident on all your income but gives you a credit for what you paid to Minnesota. The two states no longer have a reciprocity agreement, so filing in both is required every year. Because of how the credit works, you end up paying whichever state charges the higher rate on your wages, not both combined.
Why Two Returns Are Required
Wisconsin and Minnesota once let cross-border workers file only in their home state. Minnesota terminated that reciprocity agreement effective January 1, 2010.1State of Wisconsin Department Of Revenue. Withholding and Tax Filing Information Related to Wisconsin-Minnesota Income Tax Reciprocity Termination Minnesota still has reciprocity with Michigan and North Dakota, but not Wisconsin.2Minnesota Department of Revenue. Reciprocity – Employee Withholding
Two rules now overlap. Minnesota taxes nonresidents on income earned from work performed inside the state.3Minnesota Department of Revenue. How Minnesota Taxes Nonresident Income Wisconsin taxes its residents on all income no matter where it was earned. The same paycheck lands on both tax returns, and a credit on the Wisconsin side keeps you from paying twice on the same dollars.
Which Wages Minnesota Can Actually Tax
Minnesota’s authority over nonresidents is tied to physical presence. Wages for services performed in Minnesota are Minnesota-source income. Wages for work you perform from your home in Wisconsin, even for a Minnesota employer, are not Minnesota-source income.3Minnesota Department of Revenue. How Minnesota Taxes Nonresident Income
If your schedule is hybrid, this matters. Only the wages tied to days you physically worked in Minnesota are taxable there. Your employer may not track this for you, so keep a daily log. You will need it to allocate income between the two states on Schedule M1NR.
How Withholding Works
Minnesota Side
Your Minnesota employer withholds Minnesota income tax from your wages. Complete Form W-4MN so the withholding is calculated correctly.4Minnesota Department of Revenue. Form W-4MN Without a W-4MN, your employer must withhold as single with no allowances.
Do not submit Minnesota Form MWR. That form is only for Michigan and North Dakota residents and does not apply to you as a Wisconsin resident.5Minnesota Department of Revenue. Form MWR, Reciprocity Exemption/Affidavit of Residency for Tax
Wisconsin Side
Wisconsin normally does not require a second layer of withholding on those same wages. Under a special arrangement authorized by the Wisconsin Secretary of Revenue, if Minnesota tax is being withheld from your Minnesota wages, your employer is not required to also withhold Wisconsin tax on them.1State of Wisconsin Department Of Revenue. Withholding and Tax Filing Information Related to Wisconsin-Minnesota Income Tax Reciprocity Termination
If you still expect to owe $500 or more to Wisconsin after applying the credit, Wisconsin requires quarterly estimated tax payments.6Wisconsin Department of Revenue. Individual Income Tax – Estimated Tax Payments That usually only comes up if you have other Wisconsin income or if Wisconsin’s tax exceeds your Minnesota credit.
Filing the Minnesota Nonresident Return
File a Minnesota return as a nonresident if your Minnesota-source gross income meets the state’s minimum. For tax year 2025 (filed in 2026), that threshold is $14,950 for most filers.7Minnesota Department of Revenue. Nonresidents – Income Tax Fact Sheet 3 A full-time salary earned in Minnesota clears that easily.
You’ll file Form M1 with Schedule M1NR attached.8Minnesota Department of Revenue. Part-Year Residents The return calculates tax as if all your income were Minnesota income, then applies a ratio reflecting the portion actually earned there. If every workday was in Minnesota, the ratio is near 100%. If you worked some days from Wisconsin, the ratio drops.
If withholding was correct throughout the year, this return typically produces a small refund or a small balance due. Finish it before you turn to the Wisconsin return, because the final Minnesota tax figure drives the credit you claim on the Wisconsin side.
Filing the Wisconsin Resident Return and Claiming the Credit
On Wisconsin Form 1, report all your income, including the Minnesota wages you already reported to Minnesota. Wisconsin taxes residents on worldwide income, and nothing gets excluded just because another state also taxed it.1State of Wisconsin Department Of Revenue. Withholding and Tax Filing Information Related to Wisconsin-Minnesota Income Tax Reciprocity Termination Relief comes through Schedule OS, Credit for Net Tax Paid to Another State.9Wisconsin Department of Revenue. Schedule OS, Credit for Net Tax Paid to Another State
Attach a complete copy of your finalized Minnesota return to your Wisconsin filing. Wisconsin uses it to verify the tax you paid and the credit you’re claiming. Missing this attachment delays processing.
The Bordering-State Rule
For most states, Wisconsin caps the other-state credit at the Wisconsin tax attributable to that income. Minnesota borders Wisconsin, and the statute waives that cap for bordering states.10Wisconsin State Legislature. Wisconsin Statutes 71.07(7) – Other State Tax Credit The credit equals the full net income tax you paid to Minnesota, limited only by your total net Wisconsin tax liability because the credit is nonrefundable.
An example makes it concrete. Say Minnesota tax on your wages comes to $3,500, and Wisconsin tax on the same income would be $3,200. You get credit for the full $3,500, but it can’t exceed your $3,200 Wisconsin liability. Wisconsin tax drops to zero, and your total for the year is $3,500, just what Minnesota charged.11Wisconsin State Legislature. Revenue Minnesota-Wisconsin Income Tax Reciprocity Study If Wisconsin’s tax were higher, the credit would offset the Minnesota portion and you’d owe the balance to Wisconsin. The higher-rate state effectively sets your total bill.
Rates Side by Side
Minnesota’s four individual income tax brackets for 2026 are 5.35%, 6.80%, 7.85%, and 9.85%.12KSTP. Minnesota Sets 2026 Income Tax Brackets, Exemption Amounts Wisconsin’s four brackets on the most recent published rates are 3.50%, 4.40%, 5.30%, and 7.65%.13Wisconsin Department of Revenue. Tax Rates
Across most income levels, Minnesota’s marginal rate runs higher. The typical Wisconsin resident working in Minnesota pays Minnesota’s rate on their wages and owes nothing more to Wisconsin after the credit. The gap between the two rates is the cost of working in the higher-tax state, and it isn’t recoverable.
Deadlines and Estimated Payments
Both returns for the 2025 tax year are due April 15, 2026.14Minnesota Department of Revenue. Income Tax Due Dates A filing extension can push the deadline to October 15, but tax owed is still due April 15.
Minnesota’s late payment penalty is 4% of the unpaid tax, with an additional 5% if the balance is still unpaid 180 days after the filing deadline or April 15, whichever is later. Interest on unpaid Minnesota tax accrues at 7% for 2026.15Minnesota Department of Revenue. Penalties and Interest for Individuals Wisconsin has its own separate penalty and interest structure.
Minnesota requires quarterly estimated payments from nonresidents who expect to owe more than $500 and don’t have adequate withholding.7Minnesota Department of Revenue. Nonresidents – Income Tax Fact Sheet 3 If your employer withholds Minnesota tax every paycheck, you usually don’t need estimated payments on the Minnesota side. Wisconsin’s estimated payment threshold is also $500.6Wisconsin Department of Revenue. Individual Income Tax – Estimated Tax Payments
Practical Tips for Cross-Border Filers
- Track your work location every day. Days worked from home in Wisconsin or on travel outside Minnesota reduce your Minnesota-source income.
- Finalize the Minnesota return first. Your Wisconsin credit depends on the final Minnesota tax figure, and getting it right the first time avoids amendments.
- Attach a full copy of the Minnesota return to your Wisconsin filing. Wisconsin needs it to process Schedule OS.
- Confirm with payroll that only Minnesota tax is being withheld from your Minnesota wages. If both states are pulling tax, you’ll recover the excess at filing, but your cash flow suffers all year.
- Budget for the added complexity. Tax preparation for dual-state filers typically runs $200 to $500 or more.
Will Reciprocity Come Back?
Reinstating reciprocity has come up repeatedly in both legislatures since 2010. A December 2024 study by the Wisconsin Joint Committee on Finance noted that the two states’ credit structures have diverged: Minnesota now offers an unlimited refundable credit for tax paid to Wisconsin, while Wisconsin’s credit for tax paid to Minnesota is nonrefundable.11Wisconsin State Legislature. Revenue Minnesota-Wisconsin Income Tax Reciprocity Study That asymmetry complicates any deal on reimbursement between the states, which was the original sticking point. For now, plan on filing two returns every year.