Minnesota LLC Taxes Explained: 5.35%–9.85% Graduated (2026)
Minnesota's graduated income tax runs up to 9.85% — one of the higher top rates in the Midwest — but most LLC owners never pay that top rate. Here's every layer your LLC touches, including the minimum fee that catches larger multi-member LLCs, with an estimator that models your real bracket.
A default Minnesota LLC is a pass-through: profits land on your personal return at Minnesota's graduated 5.35%–9.85% income tax across four brackets. Add 15.3% federal self-employment tax on 92.35% of net profit. The LLC owes no entity-level income tax by default — its only mandatory recurring state filing is the free ($0) annual renewal. However, multi-member LLCs taxed as partnerships with substantial Minnesota property, payroll, and sales combined may owe a graduated minimum fee ($0 below roughly $1.02M, up to $10,210 at the top tier). Sellers collect 6.875%+ sales tax (state plus local). Around $60–80K profit, model an S-Corp election.
- State income tax
- 5.35%–9.85% graduated
- Top bracket threshold
- ~$203,150 single (2026)
- Entity-level tax (default)
- None
- Minimum fee (multi-member, large)
- $0–$10,210 graduated
- Sales tax
- 6.875% + local (up to ~9%)
- S-Corp threshold
- ~$60–80K profit
The 5 Layers of Minnesota LLC Taxation
Federal: income + self-employment tax
Pass-through profits hit your 1040 at your federal bracket, plus 15.3% SE tax on 92.35% of net profit — usually the biggest line.
Minnesota state income tax: graduated 5.35%–9.85%
Four brackets, indexed annually — most LLC owners land in the 5.35% or 6.8% brackets; the 9.85% top rate applies only above roughly $203,150 (single, 2026).
Entity level: usually just the free renewal
No franchise tax, and no entity income tax on default LLCs. The one exception: multi-member LLCs taxed as partnerships with substantial combined Minnesota property, payroll, and sales may owe the minimum fee — see below.
Sales tax: 6.875% + local (if applicable)
State rate plus city/county add-ons up to roughly 9% in some areas. See Step 7.
Pass-Through Entity (PTE) Tax: status uncertain for 2026+
Minnesota previously allowed an entity-level PTE election as a federal SALT-cap workaround. As of mid-2026, the election has expired for tax years beginning after December 31, 2025 unless the legislature re-enacts it — check current status with a Minnesota CPA before assuming it applies to your tax year.
Estimate Your Combined Bill
Minnesota LLC Tax Estimator
Single-member default taxation · graduated 5.35%\u20139.85% · educational estimate
The Graduated Brackets, Concretely
| 2026 Taxable Income (Single) | Rate |
|---|---|
| $0 – $33,310 | 5.35% |
| $33,311 – $109,430 | 6.80% |
| $109,431 – $203,150 | 7.85% |
| Above $203,150 | 9.85% |
The 9.85% figure gets most of the headlines, but it's a marginal rate on income above roughly $203,150 (single filer, 2026) — not your rate on every dollar. A single filer with $100,000 of Minnesota taxable income pays an effective rate closer to 5–6%, not 9.85%. Thresholds are indexed annually and roughly double for married filing jointly.
The Minimum Fee (Multi-Member LLCs Only)
Most Minnesota LLC owners never encounter this: it applies only to LLCs taxed as partnerships with two or more members whose combined Minnesota property, payroll, and sales/receipts exceed a threshold (roughly $1.02M, inflation-adjusted). Below that, the fee is $0. Above it, the fee is graduated — up to roughly $10,210 at the highest tier (combined totals of $40.82M+). Single-member LLCs and smaller multi-member LLCs virtually never owe this. If your Minnesota LLC has substantial multi-state or multi-member operations, ask your CPA to check Form M8's minimum fee calculation.
The S-Corp Question (~$60–80K Profit)
An S-Corp election changes federal taxation only: reasonable salary (payroll-taxed) plus distributions that escape the 15.3% SE tax. File Form 2553 — never Form 8832, which is the C-Corp election. Break-even lands around $60–80K of consistent profit after payroll and accounting costs. Distributions still face Minnesota's graduated income tax as income — the election shields SE tax, not state income tax. Run your numbers in the S-Corp election guide.
Your Minnesota Tax Calendar
| Date | What's Due |
|---|---|
| Jan 15 / Apr 15 / Jun 15 / Sep 15 | Quarterly estimated taxes — federal and Minnesota, on pass-through profit |
| Mar 15 | Form 1065 (multi-member LLCs) + K-1s; Form M8 if the minimum fee may apply |
| Apr 15 | Form 1040 + Minnesota M1 — federal and state individual returns |
| Dec 31 | Annual renewal to the Secretary of State ($0) — Minnesota's only mandatory annual state filing |
| Monthly/Quarterly | Sales & use tax returns via the MN Department of Revenue per your schedule |
Ahmad Adil's Take: Minnesota's 9.85% top rate scares people off before they've actually run their own numbers, and that's a mistake — most LLC owners in this state, especially early on, are paying 5.35% or 6.8% on the bulk of their profit, not the headline rate. My rule here is simple: don't budget off the top bracket unless your profit genuinely clears roughly $200K. Set aside about 27–32% of profit to cover SE tax plus your realistic Minnesota bracket, and revisit the number annually as profit grows into higher brackets. The one item worth flagging to a CPA specifically is the Pass-Through Entity Tax — it's a genuinely valuable SALT-cap workaround when it's active, but its status for 2026 tax years is uncertain as of this writing, so don't assume it applies without checking current law.
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Minnesota LLC — FAQ
Ahmad Adil is the founder and CEO of LLC School. The figures here — the $155 online Articles of Organization, the $0 annual renewal due December 31, and Minnesota’s graduated 5.35%–9.85% income tax — reflect current Minnesota Secretary of State and Department of Revenue guidance. This is educational content, not legal or tax advice.
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