The Minnesota Department of Revenue has announced the adjusted income tax brackets for 2025, marking a change driven by inflation. These adjustments ensure fairness in how Minnesotans are taxed, preventing taxpayers from paying higher taxes simply because of inflationary increases in their income. Here’s a breakdown of how tax brackets work, the specific changes for 2025, and what they mean for taxpayers across the state. 

How Do Tax Brackets Work? 

Minnesota’s tax system uses a progressive income tax structure, which means people pay higher tax rates on higher portions of their income. The income is divided into chunks, called brackets, and each chunk is taxed at a specific rate. 

For example, if you’re married and filing jointly in 2025: 

• You’ll pay 5.35% on income up to $47,620. 

• On income between $47,621 and $189,180, you’ll pay 6.80%. 

• For income between $189,181 and $330,410, the rate increases to 7.85%. 

• Anything above $330,410 is taxed at the highest rate of 9.85%. 

It’s important to note that these rates only apply to the portion of income that falls within each bracket. For instance, if your total income is $200,000, only the income over $189,180 will be taxed at 7.85%. The rest will be taxed at lower rates, depending on the bracket. 

What’s Changing in 2025? 

The tax brackets for 2025 are adjusted upward by 2.886% from 2024 levels to account for inflation. This adjustment ensures that taxpayers don’t pay higher taxes simply because their income has increased to keep pace with rising costs. 

Here are the 2025 brackets compared to 2024 for married couples filing jointly: 

Year 5.35% Up To 6.80% Start 7.85% Start 9.85% Over 

2025 $47,620 $47,621 $189,181 $330,410 

2024 $46,270 $46,271 $183,930 $321,110 

Other filing categories, such as single filers, married filing separately, and head of household, also see similar percentage adjustments. 

Why Do These Adjustments Happen? 

The state of Minnesota began indexing its tax brackets for inflation in 1979, a practice mandated by law. Each year, the Minnesota Department of Revenue calculates changes to the brackets using the U.S. Chained Consumer Price Index for all urban consumers. 

Without these adjustments, inflation would push taxpayers into higher brackets, even if their real purchasing power hadn’t increased. For example, a salary bump from $46,000 to $47,000 to cover rising costs would move a married taxpayer filing jointly into a higher bracket under a static system, even though their ability to afford goods and services hadn’t improved. The annual inflation adjustment ensures the tax system remains fair. 

How Will These Changes Affect Minnesotans? 

For most taxpayers, the changes mean a slight reduction in their tax burden compared to what they would pay without inflation adjustments. Since the brackets have shifted upward, Minnesotans can earn more money without moving into a higher tax rate. 

For example, a married couple earning $50,000 in 2024 would see about $2,379 of their income taxed at 6.80% (the second bracket). In 2025, with the adjusted brackets, only $2,380 of their income would be taxed at this rate, potentially saving them a small amount on their overall tax bill. 

Additionally, the standard deduction and dependent exemption amounts for 2025 have increased: 

Standard Deductions: 

• Married filing jointly: $29,900 

• Single or married filing separately: $14,950 

• Head of household: $22,500 

Dependent Exemption: $5,200 

These increases further reduce the taxable income for many families, especially those with dependents. 

How Does 2025 Compare to Previous Years? 

The 2025 adjustment reflects a modest inflation rate compared to recent years. For instance, in 2023, inflation adjustments were higher, around 4.5%, due to significant inflation during 2022. In 2024, adjustments were more moderate at 2.5%-2.6%, and the 2025 adjustment of 2.886% continues this trend of stabilization. 

Over the past decade, inflation adjustments have generally ranged between 1.5%-3%, except during high-inflation periods. These annual adjustments are essential to maintaining a fair tax system, ensuring Minnesotans aren’t overburdened by rising living costs. 

Final Thoughts 

The 2025 tax bracket changes offer modest relief for Minnesota taxpayers, helping them keep more of their income as inflation affects their earnings. By aligning tax brackets with the cost of living, Minnesota ensures its tax system remains equitable. 

These adjustments may seem small, but over time, they play a crucial role in preventing taxpayers from unfairly moving into higher tax brackets. As inflation stabilizes, Minnesotans can expect these annual changes to continue reflecting the cost of living, ensuring the state’s tax structure remains fair and balanced.