You Don't Have to Be Rich to Owe Minnesota Estate Tax

Here's a sentence that surprises almost everyone at a first meeting: you can owe zero dollars in federal estate tax and still write Minnesota a check. The two taxes don't share a scoreboard, and Minnesota's is a lot easier to trip over than people assume.

Two different taxes, two very different bars

The federal estate tax and the Minnesota estate tax are separate systems that happen to tax the same event. In 2026, the federal exemption sits at $15,000,000 per person, and it's now permanent thanks to the One Big Beautiful Bill Act rather than scheduled to shrink back down like it was a few years ago.¹ Married couples get to combine exemptions through something called portability, so a couple who files the right paperwork when the first spouse dies can shelter up to $30,000,000 from federal estate tax.

Minnesota's exemption is $3,000,000 per person, and it hasn't moved since 2020.² No inflation adjustment, no scheduled increase, nothing. As home values, retirement accounts, and business valuations quietly climb every year, more Minnesota families cross that line without ever feeling "rich" in the way the number implies.

The part that catches married couples off guard

Here's the one that costs real money if nobody plans for it: Minnesota does not offer portability between spouses.³ Zero. If the first spouse to pass away doesn't use their $3,000,000 exemption, it's gone, not inherited by the survivor. A couple with a combined estate well under the federal radar can still end up handing Minnesota a six-figure check simply because the exemption from the first death evaporated instead of carrying over. There are standard planning tools built specifically to solve this, which is a conversation worth having well before it becomes relevant.

What the tax actually costs

Once an estate clears the $3,000,000 threshold, Minnesota taxes the amount above it at rates ranging from 13% to 16%.⁴ There's also a lesser-known carve-out worth knowing about if farming or a closely held business is part of the picture: Minnesota allows up to an additional $2,000,000 deduction for qualifying small business or farm property, on top of the standard exemption.⁵ For a lot of Minnesota families, that deduction is the difference between owing tax and not.

One quick myth to clear up

Minnesota has an estate tax, not an inheritance tax. The distinction matters: an estate tax is owed by the estate itself before anything gets distributed, while an inheritance tax would be owed by whoever receives the money. Minnesota doesn't have the latter. If you've heard family members worry about "getting taxed on their inheritance" here, that's not quite how it works, though the estate can still shrink before it reaches them.

The bottom line

A $3,000,000 threshold sounds like a problem for someone else's balance sheet, right up until you add up a house, a 401(k), some life insurance, and maybe a business or a piece of land, and realize the number was never as far away as it felt. If your estate is anywhere near that range, or your spouse's exemption would otherwise go to waste, it's worth a real look at where you stand today rather than finding out later.

This material is for informational purposes only and is not tax or legal advice. Estate tax exposure depends on your full financial picture and how your assets are titled.

Sources

1. IRS, "IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill": estates of decedents who die during 2026 have a basic exclusion amount of $15,000,000. irs.gov
2. Minnesota Department of Revenue, "Estate Tax Filing Requirement": Minnesota estate tax returns are required when the gross estate exceeds $3,000,000, a threshold unchanged since 2020. revenue.state.mn.us
3. Minnesota Department of Revenue, "Estate Tax": overview of Minnesota's estate tax on the Minnesota assets of a decedent's estate, which does not include a spousal portability provision comparable to the federal rule. revenue.state.mn.us
4. Minnesota Department of Revenue, "Estate Tax Rates": Minnesota's estate tax rates have ranged from a low of 13% to a high of 16% since 2018. revenue.state.mn.us
5. Minnesota Department of Revenue, "Estate Tax Filing Requirement": a deduction of up to $2,000,000 is available for qualified small business property or farm property. revenue.state.mn.us