Minnesota Estate Tax 2026: $3M Exemption and Rates

The Minnesota estate tax starts above $3 million, with graduated rates that begin at 13 percent and top out at 16 percent.1 What Minnesota does not have is portability: a surviving spouse cannot add a late spouse's unused Minnesota exclusion to their own, so each death is measured against its own $3 million and an unused exclusion is simply lost.1 This guide tells you whether your estate owes, how much, and what a married couple should not assume.

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
• Minnesota Has No 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, and there is no separate inheritance tax on the people who receive the money.1

How the Minnesota Estate Tax Works

The Minnesota estate tax is paid by the estate itself, not by the heirs, and its return is filed with the Minnesota commissioner of revenue.1

The $3 million exemption and the rate schedule

The exemption is $3,000,000.1 An estate of $3,000,000 or less, with no Minnesota additions, owes no Minnesota estate tax.1 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 Because the lowest bracket is already 13 percent, even a modest taxable amount is taxed at that rate.1 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

Minnesota does not start from scratch in deciding what counts. The Minnesota taxable estate starts from the federal taxable estate, worked out on the federal Form 706 whether or not the estate owes any federal tax, then adds the Minnesota additions in Minn. Stat. 291.016, subd. 2.1 So the number to hold up against $3 million is the one the federal return produces, not the cash sitting in the bank. If the estate held property outside Minnesota, the tax is scaled down by the Minnesota share of the estate.1 An executor or estate attorney can tell you which assets the return counts before you assume an estate is under the line.

The deduction for family farms and small businesses

Minnesota has a separate break for family farms and small businesses. 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 exclusion, up to a combined subtraction of $5,000,000.1 The statute sets the qualified-property half at the lesser of the property's value or $5,000,000 minus the exclusion amount, so the exclusion and the deduction together cannot exceed $5,000,000.1

The rules are strict, and they differ between the two. Among the requirements, both demand that the person who died, or their spouse, owned the property continuously for the three years before death, and that the estate and a qualified heir elect the treatment and agree to pay the recapture tax.1 For small business property, the business must not have been a passive activity, the person who died or their spouse must have materially participated in it, its gross annual sales must have been $10,000,000 or less in the last taxable year before the death, and a family member must materially participate for the three years after.1 Farm property has no material-participation test at all. The land must instead already be classified as class 2a agricultural property and as an agricultural, agricultural relative, or special agricultural homestead for taxes payable in the year of the death, and stay class 2a for the three years after it.1 There is also a recapture tax, equal to 16 percent of the qualified-property amount claimed: it applies if, within three years of the death and while the heir is alive, the heir disposes of an interest in the property to someone outside the family, or a continuing requirement stops being met.1 The statute lists more requirements than the ones above, so confirm every condition with the Minnesota Department of Revenue or an estate attorney before counting on the deduction.1

Where Minnesota parts company with the federal rule is portability, and that gets its own section below.

Minnesota Has No Spousal Portability

This is the piece most likely to cost a Minnesota family real money, because the assumption people carry in is wrong here.

Minnesota's estate tax has no counterpart to the federal portability election: a surviving spouse cannot add a deceased spouse's unused Minnesota exclusion to their own.1 Minn. Stat. 291.016, subd. 3 states the whole of what an estate may subtract, and it is a closed list, the exclusion amount for the year of death plus the qualified small business or farm amount. Nothing in it carries an unused exclusion forward.1

So each death is measured against its own $3,000,000.1 If the first spouse to die leaves everything to the survivor, and the survivor later dies owning the combined estate, that second estate gets $3,000,000, not $6,000,000. The first spouse's exclusion is gone.

If you have read that a surviving spouse can pick up a late spouse's unused exclusion, that describes the federal portability election, which the executor has to make on a timely federal return.2 Minnesota sets its own exclusion by statute, and that election does not carry over to it.1 If anyone has told you a Minnesota couple can shelter $6 million across two deaths, ask them which Minnesota provision allows it. Then talk to a Minnesota estate attorney about what actually works here, including how the estate is titled and whether a trust at the first death fits your situation. This is general information, not legal or tax advice.

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 applies to the taxable value of the deceased person's estate, and the estate itself is liable for it. An inheritance tax applies to the taxable value of what is left to the heirs, and the heirs are liable for it, even though the estate pays it.3 For a death in 2025 or later, five states have an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania.3 Minnesota does not.1 So if you inherit from a Minnesota estate, you do not owe a Minnesota inheritance tax on your share. Any Minnesota estate tax is the estate's to pay, not yours.

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 exclusion is far higher. For deaths in 2026 the federal basic exclusion is $15 million per decedent, five times Minnesota's $3 million exemption, and taxable gifts made during life count against it.2,1 An estate can owe Minnesota tax while owing nothing to the IRS.2 The two are separate taxes on separate returns, but Minnesota starts from the federal taxable estate, computed whether or not any federal tax is due.1 Being under the federal bar does not tell you that you owe Minnesota nothing.

Medicaid estate recovery is not a tax at all. In Minnesota it is a Medical Assistance claim, under Minn. Stat. 256B.15, against the estate of someone who was 55 or older and received MA nursing facility services, home and community-based services, or related hospital and prescription drug services, or who at any age lived in a medical institution for six months or longer without a reasonable expectation of going home.4 If a parent received that kind of care through Medical Assistance, the question to look into 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. Ask the executor or an estate attorney whether the estate, valued the way the federal return values it, 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, do not plan around carrying a late spouse's unused exclusion forward, because Minnesota does not allow it.1 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.