Minnesota HSA Tax Rules: One of the Few States Still Raising Rates
Minnesota conforms to federal HSA tax treatment, same as most states in this series. What's different is the direction its rates have been moving -- while Georgia, North Carolina, Arizona, and others have been cutting rates, Minnesota raised its top bracket.
Key takeaways
- Minnesota conforms to federal HSA tax treatment -- contributions, growth, and qualified withdrawals are all state-tax-free.
- Minnesota raised its top tax rate to 10.85% in 2023 for income above $1 million (single) or $2 million (married) -- most other states in this guide series have been cutting rates, not raising them.
- Minnesota's brackets run from about 5.35% up to that 10.85% top rate -- genuinely graduated, not close to flat in practice the way Virginia's technically-progressive system is.
Full conformity
Minnesota follows federal HSA rules: contributions are deductible on the Minnesota return, investment growth isn't state-taxed, and qualified withdrawals stay tax-free.
Going against the national trend
Most of the states built into this guide series -- Georgia, North Carolina, Arizona, Michigan -- have spent recent years cutting their income tax rates. Minnesota moved the opposite direction: in 2023, it raised its top bracket to 10.85% for income above $1 million for single filers or $2 million for married couples filing jointly. That's a genuinely different fiscal trajectory than most of the rest of this series.
A genuinely graduated system
Minnesota's brackets run from roughly 5.35% up to that 10.85% top rate -- a wide enough spread that, unlike Virginia's technically-progressive-but-practically-flat system, where your effective rate falls genuinely depends on total income.
Sources: Minnesota Department of Revenue; IRS Publication 969 for federal HSA treatment.
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