Minnesota Estate Tax Rate: Brackets, Exemptions, and Filing

The Minnesota estate tax rate runs from 13% to 16% on a graduated schedule, and it only applies to the portion of an estate above $3 million. Most taxable estates in the state pay a flat 13%, because that bracket alone covers the first $7.1 million of taxable value after the exclusion. The higher rates don’t come into play until the gross estate crosses roughly $10.1 million.

When the Tax Applies

Minnesota exempts the first $3 million of an estate’s value. If the gross estate — the total fair market value of everything the deceased owned — stays at or below $3 million, no Minnesota estate tax return is required and no tax is owed.¹ Once the estate crosses that line, the tax applies only to the portion above $3 million, not the full estate.

The $3 million threshold has held steady since 2020 and is not indexed for inflation. A home, retirement accounts, life insurance proceeds, and investments can push a middle-class estate past this mark faster than families expect.

The Rate Brackets

After subtracting the $3 million exclusion, the remainder is the “Minnesota taxable estate.” The state applies this graduated schedule to that amount:²

First $7,100,000 of taxable estate: 13%
$7,100,001 to $8,100,000: $923,000 plus 13.6% of the amount over $7,100,000
$8,100,001 to $9,100,000: $1,059,000 plus 14.4% of the amount over $8,100,000
$9,100,001 to $10,100,000: $1,203,000 plus 15.2% of the amount over $9,100,000
Over $10,100,000: $1,355,000 plus 16% of the amount over $10,100,000

A worked example makes the rate concrete. An estate worth $5 million owes 13% on the $2 million above the exclusion, which comes to $260,000. An estate worth $8 million owes 13% on $5 million of taxable estate, or $650,000. The 16% top rate doesn’t touch any part of an estate until total gross value crosses about $13.1 million.

What Counts Toward the Estate

For Minnesota residents, the gross estate includes essentially everything owned at death: real estate, bank accounts, investment portfolios, retirement accounts, life insurance proceeds, vehicles, business interests, and personal property, regardless of where the property sits. A Minnesota resident’s Florida vacation home counts toward the Minnesota gross estate.

Nonresidents face a narrower scope. Minnesota only taxes nonresidents on tangible property physically located in the state, such as real estate, vehicles, boats, and furniture normally kept in Minnesota. Intangible assets like stocks, bonds, mutual funds, retirement plan balances, and bank deposits are not subject to Minnesota estate tax for nonresidents, even when held at a Minnesota institution.³ If a nonresident owns Minnesota tangible property through a partnership or LLC, their fractional share still counts.

When a nonresident owes Minnesota estate tax, the statute calculates the full tax as if the entire estate were taxable in Minnesota, then multiplies the result by a fraction: Minnesota property value over federal gross estate. That apportionment keeps the bill proportional to the Minnesota holdings.²

Gifts Made Within Three Years of Death

Minnesota adds certain gifts made within three years of death back into the estate. The rule prevents deathbed transfers from shrinking an estate below the $3 million threshold.⁴

Only “taxable gifts” under federal law get pulled back, meaning gifts that exceed the federal annual exclusion of $19,000 per recipient for 2026.⁵ Small annual gifts to grandchildren stay out. A $200,000 transfer to a family trust 18 months before death would be added back, and the amount above the annual exclusion would increase the taxable estate. Direct payments to a provider for someone’s tuition or medical bills are excluded from the lookback, since those are exempt from federal gift tax entirely.

Farm and Small Business Deductions

Estates that include qualifying farm property or small business assets can claim an additional deduction of up to $2 million. That effectively raises the tax-free threshold from $3 million to $5 million for families that qualify.¹

Qualification is strict. For small business property, the core requirements are:⁶

The trade or business cannot have been a passive activity in the tax year before death, and the deceased or their spouse must have materially participated.
Gross annual sales must have been $10 million or less in the last taxable year before death.
Ownership interests traded on a public exchange during the three years before death do not qualify.
The deceased or their spouse must have continuously owned the property for the three years ending on the date of death.
Cash, cash equivalents, publicly traded securities, and other assets not used in business operations are excluded from the deduction calculation.

The obligations continue after death. The business must stay active and cannot become a passive activity for three years after the transfer. If heirs sell the property or stop operating the business inside that window, the state can recapture the benefit, and the recapture amount equals the exclusion claimed multiplied by 16%.

No Portability Between Spouses

At the federal level, when the first spouse dies without using their full exemption, the survivor can claim the leftover. Minnesota does not allow this. Each spouse gets an individual $3 million exclusion, and any unused portion disappears at death.

The consequences show up in how assets are titled. A couple with a combined estate of $5.5 million provides the clearest illustration. If one spouse owns everything and dies first, $2.5 million exceeds the exclusion and gets taxed at 13%, roughly $325,000. If instead each spouse owned $2.75 million outright, neither estate would trigger any tax. In Minnesota, joint ownership planning changes whether the family owes tax at all.

Why Minnesota Bills Land With No Federal Bill

The federal estate tax exemption for 2026 sits far above Minnesota’s $3 million threshold.⁷ Many Minnesota estates owe state tax while owing nothing federally. An $8 million estate faces $650,000 in Minnesota estate tax and zero federal liability.

The two taxes operate independently. Minnesota estate tax paid is deductible on the federal estate tax return when one is required, but that helps only the small number of estates large enough to exceed both thresholds. The federal system uses portability between spouses and a more steeply graduated schedule starting at 18% and climbing to 40%. Minnesota’s flatter 13% floor produces a higher effective rate than the lowest federal brackets and a lower one at the top.

Filing, Payment, and Penalties

Any estate with a gross value of $3 million or more must file Form M706, the Minnesota Estate Tax Return.⁸ The return is due nine months after the date of death, and the full tax payment is due on that same date.

An automatic six-month extension is available for filing. If the IRS grants a longer extension for the federal estate tax return, Minnesota matches it. The extension only covers paperwork; it does not extend the payment deadline. Tax not paid within nine months of death begins accruing penalties and interest.⁸

Missing the payment deadline triggers a 6% penalty on any unpaid tax. If the return is also filed late and the balance isn’t paid in full at filing, another 5% penalty applies on top of that.⁹ Interest accrues from the nine-month deadline at a rate the state sets quarterly. The penalties are waived if the estate properly elects installment payments, receives a federal payment extension, or pays at least 90% of the tax by the original deadline and covers the rest by the extended filing date.

Estates heavy in illiquid farm or business assets can spread payments through an installment plan when the IRS has granted a federal payment extension, the Minnesota tax owed is at least $5,000, and the personal representative notifies the Department of Revenue within nine months of death with a written schedule matching the federal payment dates.¹⁰

1
Minnesota Department of Revenue. Estate Tax Filing Requirement
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Minnesota Office of the Revisor of Statutes. Minnesota Code 291.03 – Rates
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Minnesota House Research Department. Individual Income and Estate Taxation – Residence, Domicile, and Nonresidents
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Minnesota Office of the Revisor of Statutes. Minnesota Code 291.016 – Minnesota Taxable Estate
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Internal Revenue Service. Gifts and Inheritances
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Minnesota Office of the Revisor of Statutes. Minnesota Code 291.03 – Rates – Subdivision 9
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Internal Revenue Service. Estate and Gift Tax FAQs
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Minnesota Department of Revenue. Estate Tax Form M706 Instructions
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Minnesota Department of Revenue. Penalties and Interest for Businesses
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Minnesota Department of Revenue. Estate Tax Installment Payments