MN Income Tax

Minnesota Individual Income Tax Skill — Self-Employed / Sole Proprietor

Scope. This skill covers Minnesota Form M1 for full-year Minnesota residents who are sole proprietors or single-member LLC owners. Minnesota imposes a four-bracket graduated income tax with rates of 5.35%, 6.80%, 7.85%, and 9.85%.

Quality tier. Q3 — AI-drafted, not independently verified. All rates and thresholds were researched on 2026-05-22 from official Minnesota Department of Revenue publications. A qualified professional must review before filing.

Section 1: Metadata

Section 1: Metadata

Field	Value
Jurisdiction	Minnesota (US-MN)
Tax type	Individual income tax
Primary form	Form M1
Tax year	2026 (filed in 2027)
Authority	Minnesota Department of Revenue
Statute	Minn. Stat. § 290.06
Version	0.1
Last updated	2026-05-22
Validation	AI-drafted — Q3

Sources consulted

Sources consulted

#	Source	URL
1	Minnesota DOR — Income Tax Rates and Brackets (2026)	https://www.revenue.state.mn.us/minnesota-income-tax-rates-and-brackets
2	Minnesota DOR — 2026 Bracket Announcement	https://www.revenue.state.mn.us/press-release/2025-12-16/minnesota-income-tax-brackets-standard-deduction-and-dependent-exemption
3	Minn. Stat. § 290.06	https://www.revisor.mn.gov/statutes/cite/290.06
4	Minnesota Form M1 Instructions	https://www.revenue.state.mn.us/form-m1-individual-income-tax

Section 2: Quick reference — rates and thresholds

Tax rates — 2026 tax year (Single)

Tax rates — 2026 tax year (Single)

Taxable income	Rate
$0 – $33,310	5.35%
$33,311 – $109,430	6.80%
$109,431 – $203,150	7.85%
$203,151+	9.85%

Tax rates — 2026 tax year (MFJ / Qualifying Surviving Spouse)

Tax rates — 2026 tax year (MFJ / Qualifying Surviving Spouse)

Taxable income	Rate
$0 – $48,700	5.35%
$48,701 – $193,480	6.80%
$193,481 – $337,930	7.85%
$337,931+	9.85%

Tax rates — 2026 tax year (MFS)

Tax rates — 2026 tax year (MFS)

Taxable income	Rate
$0 – $24,350	5.35%
$24,351 – $96,740	6.80%
$96,741 – $168,965	7.85%
$168,966+	9.85%

Tax rates — 2026 tax year (Head of Household)

Tax rates — 2026 tax year (Head of Household)

Taxable income	Rate
$0 – $41,010	5.35%
$41,011 – $164,800	6.80%
$164,801 – $270,060	7.85%
$270,061+	9.85%

Standard deduction — 2026

Standard deduction — 2026

Filing status	Amount
Single / MFS	$15,300
MFJ / Surviving Spouse	$30,600
Head of Household	$23,000

Dependent exemption — 2026

• Personal exemption per taxpayer/spouse — $5,300 USD

Key thresholds

Key thresholds

Item	Value	Source
Filing deadline	April 15, 2027 (for TY 2026)	Minn. Stat. § 289A.18
Extension	Automatic 6-month with federal extension	Minn. Stat. § 289A.19
Estimated tax threshold	Liability of $500 or more after withholding and credits	Minn. Stat. § 289A.25

Section 3: How this skill works with the federal return

Minnesota taxable income begins with federal taxable income (Form 1040, Line 15 — after the federal standard or itemized deduction).

1. Additions (Schedule M1M) — Add back items Minnesota does not allow (e.g., state income tax deducted federally on Schedule A, certain bonus depreciation, IRC § 199A QBI deduction).
2. Subtractions (Schedule M1M) — Subtract items Minnesota excludes (e.g., state income tax refund included in federal income, U.S. government bond interest, Social Security subtraction for qualifying taxpayers, K-12 education credit subtraction).
3. Minnesota taxable income — Federal taxable income + additions − subtractions.
4. Tax — Apply the four graduated rates to Minnesota taxable income.
5. Credits — Apply applicable credits.

Key difference from many states: Minnesota starts from federal taxable income (after the standard/itemized deduction), not from federal AGI. This means the federal standard deduction and itemized deductions are already factored in. Minnesota then applies its own standard deduction or uses the federal amounts depending on the schedule.

Section 4: Self-employed specific rules

1. Self-employment income flows through federal Schedule C → federal AGI → federal taxable income → Minnesota taxable income (with additions/subtractions).
2. Federal SE tax deduction — Already reflected in federal AGI and thus in federal taxable income. No separate Minnesota adjustment.
3. QBI deduction add-back — Minnesota requires an addition for the federal qualified business income deduction (IRC § 199A) if it was claimed on the federal return.
4. Estimated taxes — Self-employed taxpayers must make quarterly estimated payments (Form M1, Schedule M14) if expected liability exceeds $500 after withholding and credits. Due dates: April 15, June 15, September 15, January 15.
5. Business equipment depreciation — Minnesota requires addition of federal bonus depreciation (IRC § 168(k)) and substitution of straight-line MACRS depreciation (§ 168(a)). This creates a timing difference tracked on Schedule M1AR.
6. Health insurance deduction — Self-employed health insurance deduction is in federal AGI. No Minnesota add-back.
7. No local income tax — Minnesota does not have any local or city income taxes.

Section 5: Tier 1 rules — deterministic

Section 5: Tier 1 rules — deterministic

Rule ID	Rule	Source
MN-T1-01	Start with federal taxable income (Form 1040, Line 15)	Minn. Stat. § 290.01
MN-T1-02	Add back state/local tax deduction claimed on federal Schedule A	Minn. Stat. § 290.0131
MN-T1-03	Add back IRC § 199A QBI deduction	Minn. Stat. § 290.0131
MN-T1-04	Add back federal bonus depreciation (IRC § 168(k)) and replace with straight-line MACRS	Minn. Stat. § 290.0131
MN-T1-05	Subtract U.S. government bond interest	Minn. Stat. § 290.0132
MN-T1-06	Subtract state income tax refund included in federal taxable income	Minn. Stat. § 290.0132
MN-T1-07	Apply graduated rates: 5.35%, 6.80%, 7.85%, 9.85% to the 2026 brackets	Minn. Stat. § 290.06
MN-T1-08	Dependent exemption: $5,300 per qualifying dependent (2026) — reduces tax, not income	Minn. Stat. § 290.0674
MN-T1-09	Minnesota Working Family Credit (state EITC): percentage of federal EIC (refundable)	Minn. Stat. § 290.0671
MN-T1-10	K-12 Education Credit: credit for qualifying education expenses (income-limited)	Minn. Stat. § 290.0674
MN-T1-11	Child and Dependent Care Credit: percentage of federal credit	Minn. Stat. § 290.067

Section 6: Tier 2 rules — requires judgment

Section 6: Tier 2 rules — requires judgment

Rule ID	Rule	Guidance
MN-T2-01	Residency determination — Minnesota uses a domicile test. A person domiciled in Minnesota is a resident. Spending 183+ days in MN creates a presumption of residency.	If taxpayer has homes in multiple states, flag for professional review.
MN-T2-02	Bonus depreciation add-back — Track multi-year timing differences between federal and Minnesota depreciation on Schedule M1AR.	Maintain a depreciation schedule parallel to federal.
MN-T2-03	Social Security subtraction — Minnesota taxes Social Security for higher-income taxpayers but provides a partial subtraction. Phase-out applies based on provisional income.	Compute the subtraction using the worksheet in M1 instructions.
MN-T2-04	Credit for taxes paid to other states (Schedule M1CR) — Non-refundable credit to prevent double taxation.	Requires the other state's return to compute.
MN-T2-05	Marriage credit — Reduces the marriage penalty for two-earner MFJ couples. Income-based calculation.	Compute using Schedule M1MA.
MN-T2-06	Alternative minimum tax — Minnesota imposes a state AMT (Schedule M1MT). Self-employed with large § 179 or depreciation differences should check.	Compute AMT if federal AMT preferences are significant.

Section 7: Supplier pattern library

Section 7: Supplier pattern library

Pattern	Treatment	Notes
W-2 wages from Minnesota employer	MN withholding applies; include on M1	Most common
Schedule C net profit (sole prop)	Flows through federal taxable income → MN taxable income	QBI deduction add-back required
Rental income (Schedule E)	Included in federal taxable income → MN taxable income	MN-source if property in MN
Interest on U.S. government bonds	Subtract from MN taxable income	Minn. Stat. § 290.0132
Interest on non-MN muni bonds	No addition needed (already in federal taxable income if taxed federally)	Check if exempt at federal level
Social Security benefits	Partial subtraction available (income-limited)	Use worksheet in M1 instructions
Capital gains from asset sale	Included in federal taxable income → MN taxable income	No special MN rate
1099-NEC freelance income	Flows through Schedule C → federal taxable income	Estimated payments likely needed

Section 8: Form mapping

Section 8: Form mapping

Minnesota form / schedule	What it covers	Federal counterpart
Form M1	Minnesota Individual Income Tax Return	Form 1040
Schedule M1M	Income Additions and Subtractions	Schedule 1 (Form 1040)
Schedule M1W	Minnesota Withholding	W-2/1099 withholding summary
Schedule M1CR	Credit for Taxes Paid to Other States	N/A
Schedule M1MA	Marriage Credit	N/A
Schedule M1MT	Alternative Minimum Tax	Form 6251
Schedule M1AR	Accelerated Depreciation Adjustment	N/A
Schedule M1WFC	Working Family Credit (state EITC)	Schedule EIC
Schedule M1ED	K-12 Education Credit	N/A
Form M14	Estimated Tax Instructions	Form 1040-ES

Section 9: Refusal catalogue

Section 9: Refusal catalogue

ID	Situation	Action
MN-R-01	Part-year or non-resident return (Schedule M1NR)	Refuse — out of scope
MN-R-02	Corporate franchise tax (Form M4)	Refuse — out of scope
MN-R-03	Estate tax (Form M706)	Refuse — out of scope
MN-R-04	Partnership / S-corp pass-through returns	Refuse — out of scope
MN-R-05	Multi-state income apportionment	Refuse — flag for professional review
MN-R-06	Amended returns (Form M1X)	Refuse — out of scope
MN-R-07	Tax year other than current	Refuse — rates and thresholds may differ
MN-R-08	MinnesotaCare provider tax	Refuse — different tax type

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional before filing or acting upon.

The most up-to-date, verified version of this skill is maintained at openaccountants.com.