Minnesota Estate Tax 2026: $3 Million Exclusion, 13% to 16% Rates

What the statute says

Three short sections do the work. Summaries of this tax usually quote the rates and the $3,000,000 and leave out how the two connect; that connection is what the tables below depend on.

Section 291.016 builds the base. The Minnesota taxable estate “equals the federal taxable estate as provided under section 2051 of the Internal Revenue Code, without regard to whether the estate is subject to the federal estate tax.” It then adds three items: the federal deduction for state death taxes under section 2058 (so the Minnesota tax does not reduce its own base), the foreign death tax deduction, and “the aggregate amount of taxable gifts as defined in section 2503 of the Internal Revenue Code, made by the decedent within three years of the date of death.” The addition is the gift's value under section 2512 and leaves out any value already in the federal estate. Subdivision 3 then subtracts the exclusion amount for the year of death: $2,100,000 in 2017, $2,400,000 in 2018, $2,700,000 in 2019 and $3,000,000 for decedents dying in 2020 and thereafter, plus a further amount for qualified small business and farm property, and the result cannot go below zero.

Section 291.03 applies the rates. For deaths in 2018 and after the schedule is applied to the Minnesota taxable estate, which is after the subtraction, and the result is multiplied by a fraction, not greater than one, of Minnesota gross estate plus Minnesota-situs gifts over federal gross estate plus gifts.

Section 291.031 is not the exclusion. The headnote is “Credit”, which is why summaries stop there, but the credit is narrow: an estate of a nonresident that owes Minnesota tax on Minnesota property held in a pass-through entity gets a credit for estate or inheritance tax paid to another state on that property. The $3,000,000 is a subtraction in 291.016, not a credit in 291.031.

What changed in 2026. Chapter 291 is flagged on the Revisor's site as affected by one 2026 act, Laws of Minnesota 2026, chapter 128, article 1, section 31, signed May 27, 2026. It amends only the definition of the Internal Revenue Code in 291.005, subdivision 1 (3), from “as amended through May 1, 2023” to May 1, 2026, effective the day after enactment with federal changes retroactive to their federal dates. Sections 291.016 and 291.03 carry no 2026 amendment, and the statute text has no indexing, so the exclusion is $3,000,000 for a death on any day of 2026 and, unless the Legislature acts, 2027. The Department of Revenue's rate page (last updated March 30, 2023) lists the same 13% low and 16% high rate for 2018 to the present.

Effective tax at $3.5M, $5M, $8M and $12M

Assumptions, all our arithmetic: a single Minnesota resident, every asset in Minnesota, no lifetime taxable gifts, no qualified small business or farm property, and an estate figure that is the federal tentative taxable estate (line 3(a) of federal Form 706, which is gross estate less debts, expenses, and marital and charitable deductions, before the state tax deduction).

Two readings of the table. First, there is no cliff: a $3,000,100 estate owes $13 and a $3,100,000 estate owes $13,000. What Minnesota does have is a filing line at $3,000,000 of gross estate (the Department's filing table, last updated January 5, 2026), so an estate with a large gross value and big deductions files and owes nothing. Second, the average rate climbs slowly: even at $12,000,000 the estate pays 9.9%, because 16% only touches the slice above $13,100,000.

Cross-check against the Department of Revenue. The Department publishes an Excel estate tax calculator by year of death; the list we saw (archived April 13, 2026) runs to 2025, and the 2025 file has the rate schedule written as cell formulas, for example “(I28-7100000)*0.136+923000” for the second band. We downloaded the file, entered the four estates on line 1 with the Worksheet B inputs set to an all-Minnesota estate, recalculated it in LibreOffice and read lines 9, 10 and 11: $500,000, $2,000,000, $5,000,000 and $9,000,000 of taxable estate, and $65,000, $260,000, $650,000 and $1,188,600 of tax. The same run reproduced the gift and nonresident examples below. The Department warns not to use calculator results without double-checking them and to complete federal Form 706 and Minnesota Form M706 to calculate the tax; a 2026 calculator was not on the page when we looked, so the check is against the 2025 formulas and the unchanged 2026 statute.

The three-year gift add-back

Minnesota repealed its gift tax in 2014 (Department of Revenue), so a lifetime gift triggers nothing in Minnesota when it is made. The cost shows up at death if the donor dies within three years. The Department says taxable gifts made after June 30, 2013 and within three years of death are added to the Minnesota taxable estate, and federal adjusted taxable gifts made within three years are also added to the gross estate for the filing test. Which gifts count follows section 2503: a gift covered by the annual exclusion is not a taxable gift (see our annual gift tax exclusion guide). The addition is the gift's value on the date of the gift, not at death.

All cases below are our arithmetic from the statute and the calculator lines, with a $4,000,000 federal tentative taxable estate at death plus a $2,000,000 taxable gift, and no other adjustments.

The first two rows are identical, which is the point: inside the window the gift moves nothing in Minnesota. A gift of Minnesota property or of intangibles (fund and LLC interests, cash, brokerage) by a Minnesota resident has Minnesota situs, because the statute puts intangible property at the state of domicile “for a gift of intangible personal property within three years of death, the state or country in which the decedent was domiciled when the gift was executed.” Real property in another state is outside the numerator, which is why the last row pays less. Growth after the gift stays outside the estate in every row. What the gift does to the federal side, the basis step-up it gives up and the federal exemption it uses are in our step-up in basis guide and the federal estate tax guide; none of that changes the arithmetic here.

Nonresidents with Minnesota real estate

A nonresident decedent owes Minnesota tax on Minnesota-situs property only, through the fraction in section 291.03. The Department's calculator (Worksheet B) has the same steps: Minnesota gross estate (real and tangible property located in Minnesota), plus Minnesota-situs gifts, over federal gross estate plus gifts, rounded to five decimals. Note that the $3,000,000 is subtracted first and then the tax is prorated, so the exclusion is effectively shared in proportion to the Minnesota share. The filing test uses the whole estate: the Department's filing table is on the value of the estate, so an Arizona resident with a $6,500,000 estate and a $1,500,000 Minnesota rental must file.

The pass-through rule is the notable part. For a nonresident with an interest in a pass-through entity, the situs of the entity's real or tangible property is determined “as if the pass-through entity does not exist and the real or tangible personal property is personally owned by the decedent,” in proportion to the decedent's capital share. The definition of pass-through entity covers an S corporation, an entity taxed as a partnership, a single-member LLC and a trust to the extent it is in the federal gross estate, and excludes entities whose interests trade on a national securities exchange. Our reading for real estate investors: a Minnesota building held through an LLC, a limited partnership, or a Delaware statutory trust is taxed like one held personally; a share of a corporation that is not on the list (a non-traded REIT taxed as a corporation, for example) is not a pass-through entity under that definition, so its situs would be the owner's domicile. The Department's page says the Minnesota tax is reduced if estate or inheritance tax is paid to another state for that property, which is the 291.031 credit.

Without the proration the tax on a $6,000,000 taxable estate would be $390,000. Other states treat the same LLC differently: our Washington page reports the Department of Revenue there treating an entity as intangible property even when it owns real estate, and our New Jersey page reports the Division saying a partnership interest in New Jersey real estate is intangible and not taxed for a nonresident. A reader who owns buildings in several states can therefore get opposite answers for the same structure.

Farm and small-business deduction: does it matter for real estate?

Subdivision 3 of 291.016 adds to the $3,000,000 the lesser of the value of qualified property or $5,000,000 minus the exclusion, so the extra deduction is capped at $2,000,000, the figure the Department gives for deaths after December 31, 2022. For a $6,000,000 estate it takes the tax from $390,000 to $130,000; for a $12,000,000 estate from $1,188,600 to $910,000 (our arithmetic, saving $260,000 to $278,600).

For a rental or fund portfolio it will usually not apply. Qualified small business property must be a trade or business that was not a passive activity under IRC 469(c) in the year before death, with the decedent or spouse materially participating, gross annual sales of $10,000,000 or less, and three years of continuous ownership; it may not include cash, cash equivalents, publicly traded securities or assets not used in the business. Qualified farm property must be class 2a agricultural land with an agricultural homestead classification. An heir must keep the property in family operation for three years or pay a recapture tax equal to 16% of the deduction claimed, which is $320,000 on $2,000,000. Whether an active property-management company or a hotel meets the test is a question for the attorney and the Department; passive rentals and fund shares, in our reading, do not.

Couples, portability and the second death

The statute subtracts a flat exclusion for the year of death. The sections we read have no provision that carries an unused Minnesota exclusion to a surviving spouse; Minnesota instead allows a Minnesota-only QTIP election under section 2056(b), made on the Minnesota return whether or not it is made federally (291.03 subd. 1d). The Department's calculator has a line for Minnesota-only QTIP property on a deceased spouse's return. The practical effect, in our no-growth example:

The first death owes $0 in the second row because the $3,000,000 is subtracted from a $3,000,000 taxable estate. The difference is $390,000, which is 13% of $3,000,000. Both situations owe no federal estate tax in these examples, since the federal basic exclusion is $15,000,000 for 2026 deaths. Illinois has no portability either, and the same couple saves $470,852 there on our Illinois page. Trust drafting belongs to an estate-planning attorney; our guides to the ILIT and SLAT and the family limited partnership describe tools couples use.

Minnesota against Illinois and Washington

Same assumptions as our federal estate tax guide: a single resident, all property in the state, no gifts. The Illinois and Washington figures are from our own pages for those states, not new calculations; New Jersey and Pennsylvania are not in the table because they tax inheritances by beneficiary class, not the estate (see our New Jersey and Pennsylvania pages).

Minnesota costs the most of the three at $3,500,000, sits in the middle at $5,000,000 and is the cheapest from $8,000,000 up (our arithmetic). Its exclusion ($3,000,000) equals Washington's but its first bracket is 13% against Washington's 10%, and its top rate stops at 16% against Washington's 20%; Illinois starts at $4,000,000 but charges 28.57% on the first slice above it (see our Illinois page). The Illinois column uses that state's own definition of taxable estate, so a real estate would need Illinois's calculator rather than this table.

Return, deadlines and the federal layer

Federal filing: the Department's table lists $15,000,000 for 2026 and $13,990,000 for 2025, so a Minnesota estate between $3,000,000 and $15,000,000 owes Minnesota tax and no federal tax. An estate that does owe federal tax deducts the Minnesota tax under IRC 2058, and Minnesota adds that deduction back in 291.016, so the two do not interact in a loop. On a $390,000 Minnesota tax paid 12 months late, 7% interest is about $27,300 and the 6% penalty is $23,400 (our arithmetic).

Dates to watch

• No 2026 calculator yet. The Department's calculator page we saw listed calculators through dates of death in 2025. Check the page before filing for a 2026 death; the statute text is unchanged for 2026.
• Interest rate. The Department's table shows 7% for 2026 and says rates may change annually; the 2027 rate is not in the table we saw.
• The nine-month date runs from each death. A death on October 21, 2026 puts the return and payment due July 21, 2027, with a filing extension to January 21, 2028 and no extension of payment.
• The exclusion is fixed in the statute at $3,000,000 for 2020 and after, with no indexing. A change would need a new law; we found none enacted in 2025 or 2026 in the sections we read.

What a reader can do with this

What the documents let you check before talking to anyone:

• Find the federal tentative taxable estate. Add everything owned, including a revocable trust, IRAs, rentals and fund shares; take away debts, expenses and the marital and charitable deductions. Compare gross value with $3,000,000 for the filing test and the result with the table.
• List taxable gifts of the last three years. Gifts above the annual exclusion come back into the base at their gift-date value, so a large gift does little for Minnesota unless the donor outlives the window.
• Sort the buildings by where they are and how they are held. A Minnesota building held through an LLC or partnership by a nonresident is taxed as if held personally; a resident's out-of-state deed is carved out by the fraction.
• Read the family business test early if there is an operating business or farmland: the $2,000,000 deduction needs three years of ownership before death and three years of family participation after.
• Plan for the cash. The tax and interest run from nine months after death with no extension to pay unless an IRS extension and installment election apply.

The decision, and who makes it. An estate-planning attorney drafts the documents, including any bypass trust and Minnesota-only QTIP election, and prepares Form M706 with a CPA. A financial adviser's part is how the tax would be paid from assets that are mostly real estate and illiquid funds. This page is not a recommendation to change a plan.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 21, 2026: Minnesota Statutes 2025, sections 291.005, 291.01, 291.016, 291.03 and 291.031 and the table of sections of chapter 291 (revisor.mn.gov); Laws of Minnesota 2026, chapter 128, article 1, section 31 (revisor.mn.gov); Minnesota Department of Revenue pages on estate tax, estate tax rates, filing requirement, due dates and extensions, gift tax and taxable gifts, estate tax versus inheritance tax, installment payments, pass-through entities for nonresidents, the qualified small business and farm property deduction, and penalties and interest, read through the Internet Archive because the live site returned a bot check; and the Department's 2025 Estate Tax Calculator (revenue.state.mn.us). The grid, the examples and the cross-check against the calculator are our arithmetic, with the assumptions stated. The Illinois and Washington figures come from our own pages for those states. This is analysis of public documents, not investment, legal or tax advice.