Comparing Minnesota and Wisconsin income tax comes down to a few decisions the two states made differently: Minnesota’s top rate of 9.85% sits well above Wisconsin’s 7.65%, Minnesota taxes Social Security and capital gains more aggressively, and Wisconsin’s standard deduction phases out entirely at moderate incomes while Minnesota’s stays flat. For most high earners and most retirees, Wisconsin is the cheaper state. For cross-border commuters, none of that matters until you understand the reciprocity rule.
How the Brackets Compare
Both states run four-bracket progressive systems. The rates and the income thresholds are not close.
Minnesota’s 2026 rates for single filers:
- 5.35% on the first $33,310
- 6.80% from $33,311 to $109,430
- 7.85% from $109,431 to $203,150
- 9.85% above $203,150
Married couples filing jointly hit the same rates at $48,700, $193,480, and $337,930.1Minnesota Department of Revenue. Minnesota Income Tax Brackets, Standard Deduction and Dependent Exemption Amounts for 2026
Wisconsin’s 2025 rates for single filers (2026 figures will adjust slightly for inflation):
- 3.50% on the first $14,680
- 4.40% from $14,680 to $50,480
- 5.30% from $50,480 to $323,290
- 7.65% above $323,290
Joint filers reach those rates at $19,580, $67,300, and $431,060.2Wisconsin Department of Revenue. Tax Rates
The gap matters most at the top. A single filer earning $250,000 faces a 9.85% marginal rate in Minnesota but only 5.30% in Wisconsin on most of that income. Even in the middle, Minnesota’s second bracket is 6.80% where Wisconsin’s is 4.40%. Minnesota also imposes a 1% net investment income tax on individuals with net investment income above $1,000,000.3Minnesota Office of the Revisor of Statutes. Minnesota Code 290.033 – Net Investment Income Tax Wisconsin has no equivalent surcharge.
The Standard Deduction Changes the Math
Rate comparisons alone overstate Wisconsin’s advantage at moderate incomes. Minnesota uses a flat standard deduction: $15,300 for single filers and $30,600 for married joint filers in 2026.1Minnesota Department of Revenue. Minnesota Income Tax Brackets, Standard Deduction and Dependent Exemption Amounts for 2026
Wisconsin’s standard deduction slides downward as income rises. A single filer earning under $19,550 gets the maximum $13,560 for 2025, but the deduction shrinks by 12 cents on every dollar earned above that threshold and vanishes once income passes $132,550. Married joint filers top out at $25,110, with the deduction gone above $155,169.4Wisconsin State Legislature. General Fund Taxes – Income and Franchise Taxes A Wisconsin household earning $160,000 gets no standard deduction at all; the same household in Minnesota still subtracts $30,600 before rates apply.
So the practical picture at upper-middle incomes is a Wisconsin resident paying lower rates on a larger taxable base, and a Minnesota resident paying higher rates on a smaller one. Run both scenarios with your actual numbers before concluding one state wins.
Social Security and Retirement Income
If you’re deciding where to retire, this is the section that usually decides it.
Social Security
Wisconsin exempts 100% of Social Security benefits. No income cap, no phaseout, nothing on the state return.
Minnesota taxes a portion of Social Security for higher-income retirees. The state offers two subtraction methods and lets you take whichever is larger. Under the simplified method, you can subtract the full benefit, but the subtraction phases out once adjusted gross income exceeds $100,000 for joint filers or $78,000 for single filers (indexed for inflation from a 2023 base). Under the alternate method, joint filers can subtract up to $5,840, phasing out as provisional income exceeds $88,630.5Minnesota Office of the Revisor of Statutes. Minnesota Code 290.0132 – Subtractions From Federal Taxable Income Lower-income Minnesota retirees may pay little or no state tax on benefits; higher-income retirees will owe something Wisconsin would not charge at all.
Pensions and Other Retirement Plans
Wisconsin added a retirement income subtraction that took effect for tax year 2025. Taxpayers age 67 or older by December 31 can subtract up to $24,000 of qualified retirement plan distributions and IRA withdrawals, with up to $48,000 available for certain joint filers. A smaller $5,000 subtraction is available for those 65 or older with federal AGI under $15,000 ($30,000 for married filers). Claiming the larger subtraction means giving up the Wisconsin income tax credit for that year, so retirees should calculate both ways.6Wisconsin Department of Revenue. Wisconsin Tax Information for Retirees – Publication 106
Minnesota has no comparable general retirement income subtraction, though it provides one for certain public employees whose positions did not earn Social Security credit.
Military Retirement
Wisconsin fully exempts military retirement pay, including Survivor Benefit Plan payments and retirement from the Coast Guard, NOAA commissioned corps, and Public Health Service commissioned corps.7Wisconsin Department of Revenue. Wisconsin Tax Information for Military Personnel and Veterans – Publication 128 Minnesota offers only a partial subtraction.
Capital Gains and Investment Income
Minnesota taxes all capital gains as ordinary income. Long-term and short-term land in the same brackets, so a large stock or property sale can push you into the 9.85% bracket with no holding-period discount. Starting in tax year 2026, individuals with net investment income above $1,000,000 owe an additional 1% on interest, dividends, annuities, royalties, and capital gains not derived from a trade or business.3Minnesota Office of the Revisor of Statutes. Minnesota Code 290.033 – Net Investment Income Tax
Wisconsin allows a 30% deduction on net long-term capital gains, which cuts the state tax on assets held longer than a year. For farm assets held more than a year, the deduction doubles to 60%.8Wisconsin Department of Revenue. Reporting Capital Gains and Losses for Wisconsin Combined with Wisconsin’s lower top rate, selling appreciated assets as a Wisconsin resident produces a meaningfully smaller state tax bill than the same transaction would in Minnesota.
If You Live in One State and Work in the Other
Minnesota and Wisconsin have a reciprocity agreement, and it changes everything for commuters. You pay income tax only to the state where you live, not where you work.9Minnesota Office of the Revisor of Statutes. Minnesota Code 290.081 – Income of Nonresidents, Reciprocity A Wisconsin resident commuting into Minneapolis files only in Wisconsin on those wages. A Minnesota resident working in La Crosse files only in Minnesota.
To make it work in payroll, file Form MWR (Reciprocity Exemption/Affidavit of Residency) with your employer. The form tells payroll to withhold for your home state. You need a new one each year and whenever you change jobs. The agreement covers wages, salary, tips, bonuses, and commissions. It does not cover business income, rental income, or partnership distributions.
Skip the form and your employer will withhold for the work state. You’ll then have to file a nonresident return in that state to claim the refund while still paying your home state. The money sorts itself out, but you’ll be waiting on it for months.
Which State Actually Claims You
All of the above only matters once you know which state calls you a resident. Each state defines domicile as your true, permanent home where you intend to remain indefinitely. You can have only one domicile at a time, and physical presence alone doesn’t settle it.
Minnesota’s Department of Revenue weighs where you spend most of your time, where your spouse and dependents live, where you vote and hold a driver’s license, where your bank accounts and healthcare providers sit, and the size and value of your homes in each state.10Minnesota Department of Revenue. Income Tax Fact Sheet 1 – Residency No single factor decides, but auditors look for consistency across all of them. Keeping a Minnesota professional license, or leaving a spouse in Minnesota while claiming Wisconsin residency, are common audit triggers.
Wisconsin applies similar criteria and may require you to complete Form I-827, the Legal Residence (Domicile) Questionnaire, to establish your status.11Wisconsin Department of Revenue. Legal Residence/Domicile
If you’re actually moving, change your voter registration, driver’s license, vehicle titles, and bank addresses promptly, and keep a calendar of days in each state. Connections you leave behind are what the old state will point to when it argues you never really left.
Minnesota’s New Paid Leave Premium
Starting in 2026, Minnesota workers and employers pay into the Paid Family and Medical Leave Insurance program. The total premium is 0.88% of wages (0.61% medical, 0.27% family), applied up to the Social Security wage base of $185,000. Employers must cover at least half, and the employee share cannot exceed 0.44% of wages. Small employers qualify for a reduced 0.66% rate.
Wisconsin has no equivalent program. If you live in Wisconsin but work in Minnesota, you’re generally subject to Minnesota workplace rules, so the premium will likely come out of your paycheck even though your income tax goes to Wisconsin.