Minnesota Estate Tax 2026: $3M Exemption and Rates

The Minnesota estate tax starts above $3 million, with rates that begin at 13 percent, and for deaths after June 30, 2025 it lets a surviving spouse carry over a late spouse's unused exemption.1 Only a handful of states with an estate tax offer that portability. This guide tells you whether your estate owes, how much, and how the spousal break works.

If you are planning your own estate or settling a parent's, the figures below are the ones that decide it.

In This Guide

• Minnesota Estate Tax at a Glance
• How the Minnesota Estate Tax Works
• Spousal Portability
• Estate Tax Is Not Inheritance Tax
• Not the Federal Tax, Not Medicaid Recovery
• Frequently Asked Questions
• Next Steps

Minnesota Estate Tax at a Glance

Here is the full picture in one table. Minnesota runs a graduated estate tax, paid by the estate before assets pass to heirs, and there is no separate inheritance tax on the people who receive the money.1

How the Minnesota Estate Tax Works

The estate tax is a tax on the value of everything a person owned at death, paid by the estate itself, not by the heirs. The executor files the return and pays the bill out of estate assets before the remainder is distributed.

The $3 million exemption and the rate schedule

The exemption is $3,000,000.1 An estate below that owes no Minnesota estate tax and, in most cases, does not need to file. Only the value above the exemption is taxed, so an estate just over the line is taxed on a small slice, not on the whole thing.

The rate is graduated, climbing in brackets from 13 percent to 16 percent as the taxable estate grows.1 The 13 percent bracket runs up to a Minnesota taxable estate of $7,100,000, and the top 16 percent bracket applies to the portion above $10,100,000.1 Minnesota's lowest bracket starts at 13 percent, higher than the entry rate in some other states, so even a modest taxable amount carries a meaningful rate. The return is filed on Form M706, using the schedules the Minnesota Department of Revenue publishes, and it is due within nine months of the death.1

What counts toward the estate

What counts toward the estate is broader than people expect. The taxable estate generally includes the home and any other real estate, bank and brokerage accounts, retirement accounts like IRAs and 401(k)s, the death benefit of life insurance the deceased owned, business interests, vehicles, and personal property. It is the gross value of what the person owned or controlled at death, not just the cash sitting in the bank. That is why a homeowner who never thought of themselves as wealthy can have an estate that clears $3 million once the house and the retirement accounts are added together.1

The deduction for family farms and small businesses

Minnesota has a break aimed at keeping family farms and small businesses intact. Its qualified small business property and qualified farm property deduction lets an estate subtract the value of a qualifying business or farm from the taxable estate, on top of the $3 million exemption.1

The rules are strict. The person who died, or their spouse, must have owned the property for the three years before death, a family member has to materially participate in running the business or farm, and the estate and a qualified heir must elect the treatment. There is also a recapture tax: if the heir sells the property to someone outside the family, or the family stops meeting the requirements, within three years of the death, Minnesota claws back the tax the deduction saved.1 The maximum deduction and the qualifying details change over time, so confirm the current figure and the conditions with the Minnesota Department of Revenue or an estate attorney before counting on it.

Where Minnesota stands out is portability, which gets its own section below.

Spousal Portability

Most states with an estate tax do not let a surviving spouse use a deceased spouse's unused exemption. Minnesota now does, but only recently.

Minnesota allows portability of a deceased spouse's unused exclusion between spouses for deaths after June 30, 2025.1 The 2025 Legislature added it; earlier deaths did not qualify. In plain terms, if the first spouse to die does not use up their full $3 million exemption, the surviving spouse can carry over the unused portion, effectively raising the amount the surviving spouse's estate can pass tax-free. For a married couple, this can roughly double the combined exemption when used correctly.

Portability is a different tool from the marital deduction, and the two work together. Transfers to a surviving spouse pass free of estate tax under the unlimited marital deduction, so leaving everything to a spouse defers any tax to the second death. The marital deduction moves the assets tax-free; portability preserves the first spouse's exemption so it is not wasted in the process.

Portability is not automatic. It generally requires the executor of the first spouse's estate to make an election on a timely filed estate tax return, even when no tax is owed. That is a step families miss, and missing it can forfeit a large benefit. If you are settling a spouse's estate and the surviving spouse has significant assets, ask an estate attorney whether a portability election should be filed, even if the first estate owes nothing. This is general information, not legal or tax advice.

Picture a couple with a combined estate of $5 million. If the first spouse to die leaves everything to the survivor, that transfer is generally tax-free under the marital deduction, but the first spouse's $3 million exemption can go unused. With a properly filed portability election, the survivor can carry over that unused exemption, so the survivor's estate can shelter a much larger amount than the $3 million exemption alone would cover. Without the election, the second estate is left with only its own $3 million, and the rest is exposed to tax.1 The dollars at stake here are exactly why the election is worth confirming rather than assuming.

Estate Tax Is Not Inheritance Tax

These two terms get used as if they mean the same thing. They do not, and the difference decides who pays.

An estate tax is paid by the estate, out of the deceased person's assets, before anything is distributed. An inheritance tax is paid by the heirs, on what each receives, after distribution. A handful of states have an inheritance tax. Minnesota does not.1 So if you inherit from a Minnesota estate, you do not owe a Minnesota inheritance tax on your share. Any tax owed was the estate's responsibility and was settled before you received anything.

For heirs, that means the estate tax can reduce what is left to divide, but it does not land a separate bill on each beneficiary.

Not the Federal Tax, Not Medicaid Recovery

Two other things get confused with the state estate tax. Both are different, and the distinction matters.

The federal estate tax is separate, and its exemption is far higher. For deaths in 2026 the federal exemption is $15 million per person, five times Minnesota's $3 million exemption.2,1 Many estates owe Minnesota tax while owing nothing to the IRS, because they fall in the gap between the two figures. The two taxes are calculated independently, on separate returns. Clearing the federal bar tells you nothing about whether you owe Minnesota.

Medicaid estate recovery is not a tax at all. It is the process by which a state seeks repayment from the estate of someone who received certain Medicaid-funded long-term care. It applies to a different group of people, for a different reason, under separate rules. If a parent received Medicaid-paid nursing home care, the relevant concern is recovery, not the estate tax. We cover it fully in Medicaid estate recovery; the similar name does not make them one issue.

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Next Steps

Settling an estate is hard enough without a tax surprise. Add up the home, the accounts, and the life insurance, and see whether the total clears $3 million.1 If it does, note the deadline: the Form M706 return is due within nine months of the death.1 If you are married and the death is after June 30, 2025, ask about the portability election, because missing it can forfeit a large exemption. If a family farm or business is in the estate, ask about the qualified-property deduction too. A Minnesota estate attorney can confirm all three.

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The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.