Minnesota does tax pensions. Distributions from a 401(k), a traditional IRA, or an employer pension plan that are taxable on your federal return flow straight into your Minnesota return and are taxed at rates from 5.35% to 9.85%.1Minnesota Department of Revenue. Income Tax Rates and Brackets The state carves out targeted breaks for military retirees, certain public employees whose jobs were not covered by Social Security, foreign service retirees, and Social Security recipients under set income thresholds. Private-sector pensions get no general subtraction, so for most retirees the full distribution is taxable.
How Minnesota Calculates the Tax
Minnesota starts with your federal adjusted gross income and then applies state additions and subtractions.2Minnesota Office of the Revisor of Statutes. Minnesota Code 290.01 – Definitions Any pension distribution the IRS treats as taxable enters your Minnesota calculation at full value unless a specific subtraction pulls it back out. Qualified Roth IRA and Roth 401(k) distributions are excluded from federal AGI, so they never show up on the state return either.
For tax year 2026, the brackets are:1Minnesota Department of Revenue. Income Tax Rates and Brackets
- 5.35% on the first $48,700 (married filing jointly) or $33,310 (single)
- 6.80% up to $193,480 (joint) or $109,430 (single)
- 7.85% up to $337,930 (joint) or $203,150 (single)
- 9.85% on income above those thresholds
A retiree with $60,000 of combined pension and traditional IRA income and no other earnings owes state tax on that entire amount after standard deductions. There is no across-the-board pension exclusion. The subtractions below cover specific groups only.
Military Retirement Pay
Military retirees get the cleanest treatment in the state. Qualifying military pension income can be fully subtracted with no dollar cap.3Minnesota Department of Revenue. Military Pension Subtraction Qualifying income includes:
- Active-duty retirement pay computed under Title 10 of the U.S. Code, sections 1401 through 1414
- Reserve component retirement pay under Title 10, section 12733
- Survivor benefit plan payments under Title 10, sections 1447 through 1455, including payments to a former spouse under a divorce order
Pensions earned solely from service as a dual-status military technician do not qualify.3Minnesota Department of Revenue. Military Pension Subtraction If you claim the military pension subtraction, you cannot also claim the nonrefundable Credit for Past Military Service.4Minnesota Department of Revenue. 2025 Schedule M1M, Income Additions and Subtractions
Public Pensions Not Covered by Social Security
A separate subtraction exists for retirees whose public-service jobs did not earn Social Security credits. This covers many state and local employees, including some police officers, firefighters, and certain federal workers.5Minnesota Department of Revenue. Revenue Notice 24-02 – Qualified Retirement Benefits Subtraction – Allocation Because those retirees receive no Social Security, the pension is often their only retirement income, and the subtraction offsets part of it.
The base cap is $25,000 for married couples filing jointly and $12,500 for other filers, adjusted annually for inflation.5Minnesota Department of Revenue. Revenue Notice 24-02 – Qualified Retirement Benefits Subtraction – Allocation For 2025, the inflation-adjusted caps are $27,080 (joint) and $13,540 (all others). The subtraction phases out at higher income levels and is calculated on Schedule M1QPEN.4Minnesota Department of Revenue. 2025 Schedule M1M, Income Additions and Subtractions
Eligibility turns on one question: was your government position covered by Social Security? If it was, this subtraction does not apply to that pension. Survivor benefit recipients can qualify if the original member’s service met the requirement.
Foreign Service Retirement
Retirees drawing pensions from the Foreign Service Retirement and Disability System or the Foreign Service Pension System under Title 22 of the U.S. Code can subtract that income.4Minnesota Department of Revenue. 2025 Schedule M1M, Income Additions and Subtractions If your federal career mixed foreign service with other government roles, only the portion tied to foreign service qualifies, and a worksheet on Schedule M1M handles the allocation.
Social Security Benefits
Most people asking about pension taxes also want to know about Social Security. Minnesota expanded its Social Security subtraction in 2023, and the current rules make benefits effectively tax-free for most recipients below set income thresholds.6Minnesota House of Representatives. Taxation of Social Security Benefits in Minnesota Two calculation methods run in parallel, and you take whichever gives the larger break.7Minnesota Office of the Revisor of Statutes. Minnesota Code 290.0132 – Income Subtractions
Under the simplified method, if your adjusted gross income sits at or below $108,320 (joint) or $84,490 (single or head of household), you subtract all of your federally taxable Social Security benefits.8Minnesota Department of Revenue. Social Security Benefit Subtraction Above those thresholds the subtraction drops by 10% for every $4,000 of income over the cap. A joint filer with AGI of $148,320 or more loses the simplified subtraction entirely.7Minnesota Office of the Revisor of Statutes. Minnesota Code 290.0132 – Income Subtractions These are 2025 figures and will be inflation-adjusted for 2026.
Higher-income retirees who lose the simplified subtraction can still use an alternative calculation based on provisional income. The maximum alternative subtraction is $5,840 for joint filers and $4,560 for single or head-of-household filers, reduced by 20% of provisional income above $88,630 (joint) or $69,250 (single).7Minnesota Office of the Revisor of Statutes. Minnesota Code 290.0132 – Income Subtractions
What Happens If You Move Out of Minnesota
Residency at the time you receive each payment controls whether Minnesota can tax it. As a full-year resident, you owe Minnesota tax on all pension income, wherever the job was located.9Minnesota Department of Revenue. Tax Information for Seniors Move partway through the year, and Minnesota can only tax the pension income you received while a resident.
Once you fully establish residency in another state, federal law takes over. Under 4 U.S.C. ยง 114, no state can tax the retirement income of someone who is not a resident or domiciliary there.10Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income The protection covers distributions from 401(k) plans, IRAs, 403(b) accounts, governmental 457 plans, and military retired pay. Retire to a no-income-tax state and Minnesota cannot follow your pension across the border. Keep a Minnesota home, driver’s license, or substantial time in the state, however, and the Department of Revenue may argue you remain a resident.
Withholding and Estimated Payments
A pension check that arrives with only federal tax withheld can produce an unpleasant surprise in April. Minnesota requires estimated tax payments if you expect to owe $500 or more after withholding and refundable credits, and the Department of Revenue lists pension income as a common trigger.11Minnesota Department of Revenue. Estimated Tax
State withholding is separate from federal withholding. If your pension administrator does not withhold Minnesota tax, submit a Form W-4MNP asking them to, or make quarterly estimated payments to avoid underpayment penalties. Setting withholding at a level that covers your expected liability is usually the simpler route.