HF 3955
Introduction - 94th Legislature (2025 - 2026)
Posted on 03/05/2026 02:05 p.m.
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A bill for an act
relating to taxation; income and property tax refunds; providing a subtraction for
certain tip income; expanding the Minnesota child tax credit; providing a onetime
expansion of property tax refunds; establishing a new fifth tier individual income
tax rate; amending Minnesota Statutes 2024, sections 290.0132, by adding a
subdivision; 290.06, subdivision 2d; 290.0661, subdivisions 3, 7; Minnesota
Statutes 2025 Supplement, section 290.06, subdivision 2c.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
to read:
new text begin Subd. 40. new text end
new text begin Tip income. new text end
new text begin
The amount of qualified tips allowed as a deduction under section
224 of the Internal Revenue Code is a subtraction.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective retroactively for taxable years beginning
after December 31, 2024.
new text end
Sec. 2.
Minnesota Statutes 2025 Supplement, section 290.06, subdivision 2c, is amended
to read:
Subd. 2c.
Schedules of rates for individuals, estates, and trusts.
(a) The income taxes
imposed by this chapter upon married individuals filing joint returns and surviving spouses
as defined in section 2(a) of the Internal Revenue Code must be computed by applying to
their taxable net income the following schedule of rates:
(1) On the first deleted text begin $38,770deleted text end new text begin $48,700new text end , 5.35 percent;
(2) On all over deleted text begin $38,770deleted text end new text begin $48,700new text end , but not over deleted text begin $154,020deleted text end new text begin $193,480new text end , 6.8 percent;
(3) On all over deleted text begin $154,020deleted text end new text begin $193,480new text end , but not over deleted text begin $269,010deleted text end new text begin $207,660new text end , 7.85 percent;
(4) On all over deleted text begin $269,010deleted text end new text begin $207,660, but not over $1,000,000new text end , 9.85 percentnew text begin ; and
new text end
new text begin (5) On all over $1,000,000, 10.7 percentnew text end .
Married individuals filing separate returns, estates, and trusts must compute their income
tax by applying the above rates to their taxable income, except that the income brackets
will be one-half of the above amounts after the adjustment required in subdivision 2d.
(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:
(1) On the first deleted text begin $26,520deleted text end new text begin $33,310new text end , 5.35 percent;
(2) On all over deleted text begin $26,520deleted text end new text begin $33,310new text end , but not over deleted text begin $87,110deleted text end new text begin $109,430new text end , 6.8 percent;
(3) On all over deleted text begin $87,110deleted text end new text begin $109,430new text end , but not over deleted text begin $161,720deleted text end new text begin $114,050new text end , 7.85 percent;
(4) On all over deleted text begin $161,720deleted text end new text begin $114,050, but not over $600,000new text end , 9.85 percentnew text begin ; and
new text end
new text begin (5) On all over $600,000, 10.7 percentnew text end .
(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as
a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:
(1) On the first deleted text begin $32,650deleted text end new text begin $41,010new text end , 5.35 percent;
(2) On all over deleted text begin $32,650deleted text end new text begin $41,010new text end , but not over deleted text begin $131,190deleted text end new text begin $164,800new text end , 6.8 percent;
(3) On all over deleted text begin $131,190deleted text end new text begin $164,800new text end , but not over deleted text begin $214,980deleted text end new text begin $270,060new text end , 7.85 percent;
(4) On all over deleted text begin $214,980deleted text end new text begin $270,060, but not over $800,000new text end , 9.85 percentnew text begin ; and
new text end
new text begin (5) On all over $800,000, 10.7 percentnew text end .
(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax
of any individual taxpayer whose taxable net income for the taxable year is less than an
amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not more
than $100. The amount of tax for each bracket shall be computed at the rates set forth in
this subdivision, provided that the commissioner may disregard a fractional part of a dollar
unless it amounts to 50 cents or more, in which case it may be increased to $1.
(e) An individual who is not a Minnesota resident for the entire year must compute the
individual's Minnesota income tax as provided in this subdivision. After the application of
the nonrefundable credits provided in this chapter, the tax liability must then be multiplied
by a fraction in which:
(1) the numerator is the individual's Minnesota source federal adjusted gross income as
defined in section 62 of the Internal Revenue Code and increased by:
(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,
and 20, and 290.0137, paragraph (a); and reduced by
(ii) the Minnesota assignable portion of the subtraction for United States government
interest under section 290.0132, subdivision 2, the subtractions under sections 290.0132,
subdivisions 9, 14, 15, 18, 27, 31, and 32, and 290.0137, paragraph (c), after applying the
allocation and assignability provisions of section 290.081, clause (a), or 290.17; and
(2) the denominator is the individual's federal adjusted gross income as defined in section
62 of the Internal Revenue Code, increased by:
(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,
and 20, and 290.0137, paragraph (a); and reduced by
(ii) the subtractions under sections 290.0132, subdivisions 2, 9, 14, 15, 18, 27, 31, and
32, and 290.0137, paragraph (c).
(f) If an individual who is not a Minnesota resident for the entire year is a qualifying
owner of a qualifying entity that elects to pay tax as provided in section 289A.08, subdivision
7a, paragraph (b), the individual must compute the individual's Minnesota income tax as
provided in paragraph (e), and also must include, to the extent attributed to the electing
qualifying entity:
(1) in paragraph (e), clause (1), item (i), and paragraph (e), clause (2), item (i), the
addition under section 290.0131, subdivision 5; and
(2) in paragraph (e), clause (1), item (ii), and paragraph (e), clause (2), item (ii), the
subtraction under section 290.0132, subdivision 3.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2025.
new text end
Sec. 3.
Minnesota Statutes 2024, section 290.06, subdivision 2d, is amended to read:
Subd. 2d.
Inflation adjustment of brackets.
The commissioner shall annually adjust
the minimum and maximum dollar amounts for each rate bracket for which a tax is imposed
in subdivision 2c as provided in section 270C.22. The statutory year is taxable year deleted text begin 2019deleted text end new text begin
2026new text end . The rate applicable to any rate bracket must not be changed. The dollar amounts
setting forth the tax shall be adjusted to reflect the changes in the rate brackets. The rate
brackets as adjusted must be rounded to the nearest $10 amount. If the rate bracket ends in
$5, it must be rounded up to the nearest $10 amount. The commissioner shall determine the
rate bracket for married filing separate returns after this adjustment is done. The rate bracket
for married filing separate must be one-half of the rate bracket for married filing joint.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2025.
new text end
Sec. 4.
Minnesota Statutes 2024, section 290.0661, subdivision 3, is amended to read:
Subd. 3.
Credit amount.
The credit under this section equals deleted text begin $1,750deleted text end new text begin $2,000new text end per
qualifying child.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2025.
new text end
Sec. 5.
Minnesota Statutes 2024, section 290.0661, subdivision 7, is amended to read:
Subd. 7.
Inflation adjustment.
(a) For taxable years beginning after December 31, deleted text begin 2025deleted text end new text begin
2026new text end , the commissioner of revenue must annually adjust for inflation the credit amount in
subdivision 3 as provided in section 270C.22. The adjusted amounts must be rounded to
the nearest $60. The statutory year is taxable year deleted text begin 2025deleted text end new text begin 2026new text end .
(b) For taxable years beginning after December 31, 2023, the commissioner of revenue
must annually adjust for inflation the phaseout thresholds in subdivision 4, as provided in
section 270C.22. The statutory year is taxable year 2023.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2025.
new text end
Sec. 6. new text begin TEMPORARY PROPERTY TAX REFUND INCREASE FOR 2026.
new text end
new text begin
(a) For claims filed based on taxes payable in 2026, the commissioner shall increase by
11.9 percent the refund otherwise payable under Minnesota Statutes, section 290A.04,
subdivision 2.
new text end
new text begin
(b) In adjusting homestead credit refunds under this section, the commissioner is not
required to provide information concerning appeal rights that ordinarily must be provided
whenever the commissioner adjusts refunds payable under Minnesota Statutes, chapter 290.
Taxpayers retain all rights to appeal adjustments under this section.
new text end
new text begin
(c) The amount necessary to make the payments required under this section is
appropriated from the general fund to the commissioner of revenue.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective only for refunds based on property taxes
payable in 2026.
new text end