Short answer: Minnesota taxes estates worth more than $3,000,000 at death. The rate starts at 13 percent and tops out at 16 percent. Farm families may cut the tax with the qualified farm property deduction. But they must follow strict rules for three years before and after death.
This guide explains the Minnesota estate tax in plain words. It covers who owes it, how much it costs, and how farm families can plan ahead. It is general information, not legal advice for your family.
Who owes the Minnesota estate tax?
An estate tax (a tax on what a person owns at death) is paid before heirs get their share. The executor or personal representative (the person in charge of the estate) must file the return and pay the tax.
Minnesota uses its own exclusion amount (the amount you can leave without paying tax). For deaths in 2020 and later, that amount is $3,000,000 (Minn. Stat. 291.016). It is not tied to inflation, so it stays the same each year.
A return is required when two numbers add up to more than $3,000,000. They are the federal gross estate and taxable gifts from the last three years. The federal gross estate (the total value of what the person owned at death) includes land, machinery, and grain. A return is also required whenever a federal estate tax return is required.
Where you live matters. If you lived in Minnesota, the tax reaches your whole estate. The exception is land and physical property located in another state. If you lived somewhere else, Minnesota taxes only property with a Minnesota situs (location), such as Minnesota farmland (Minn. Stat. 291.005). For nonresidents, land held in an LLC or other pass-through entity is treated as if you owned it directly.
Minnesota estate tax rates
First, the estate figures its Minnesota taxable estate. It starts with the federal taxable estate. That number already subtracts debts, costs of settling the estate, gifts to charity, and property left to a spouse. Then Minnesota adds back some items and subtracts the $3,000,000 exclusion (Minn. Stat. 291.016). The rates below apply to what is left (Minn. Stat. 291.03).
| Minnesota taxable estate (after the exclusion) | Tax |
|---|---|
| Up to $7,100,000 | 13 percent |
| $7,100,000 to $8,100,000 | $923,000 plus 13.6 percent of the amount over $7,100,000 |
| $8,100,000 to $9,100,000 | $1,059,000 plus 14.4 percent of the amount over $8,100,000 |
| $9,100,000 to $10,100,000 | $1,203,000 plus 15.2 percent of the amount over $9,100,000 |
| Over $10,100,000 | $1,355,000 plus 16 percent of the amount over $10,100,000 |
The tax is then multiplied by a fraction. The fraction is the Minnesota share of the whole estate. A Minnesota resident who owns land in another state will pay a bit less because of this step.
The 3-year gift addback
Minnesota repealed its gift tax in 2014. So you can give property away during life without a Minnesota gift tax. But there is a catch.
Taxable gifts made within three years of death are added back to the estate (Minn. Stat. 291.016). A taxable gift is generally the part of a gift that goes over the federal annual exclusion. For 2026, the federal annual exclusion is $19,000 per person you give to. A gift that is already counted in the federal estate is not added twice.
The takeaway is simple. Gifts made more than three years before death are not pulled back into the Minnesota estate tax. Gifts made inside that window are.
The qualified farm property deduction
Minnesota offers an extra deduction for qualified farm property and qualified small business property (Minn. Stat. 291.03, subd. 8 to 11). The exclusion and this deduction together cannot go over $5,000,000 (Minn. Stat. 291.016). Since the exclusion is $3,000,000, the most the farm deduction can add is $2,000,000.
Farmland must meet all of these rules (Minn. Stat. 291.03, subd. 10):
- The land was included in the estate for federal purposes.
- It is agricultural land owned by a person or entity allowed under Minnesota’s corporate farm law (Minn. Stat. 500.24).
- In the year of death, it was class 2a (agricultural) land. It also had an agricultural, relative, or special agricultural homestead classification.
- The person who died or their spouse owned it without a break for the three years before death. Ownership through a qualifying entity can count.
- The land stays class 2a for three years after death.
- The estate and the qualified heir make the election and agree to pay any recapture tax.
A qualified heir (the family member who receives the land) must be a family member. That includes the decedent’s spouse, parents and other ancestors, and descendants of the decedent, the spouse, or the decedent’s parents. Spouses of those descendants also count. A trust counts if all of its current beneficiaries are family members.
The estate claims the deduction on Schedule M706Q. Farm businesses that are not land, such as equipment or an operating company, may fit the small business rules instead. Those rules include a $10,000,000 gross sales limit and material participation (regular, hands-on work in the business) tests (Minn. Stat. 291.03, subd. 9).
The recapture tax
The deduction comes with a three-year promise. A recapture tax can apply within three years of death. It applies if the heir sells or gives away an interest outside the family. It also applies if the land loses its class 2a status (Minn. Stat. 291.03, subd. 11).
The recapture tax is 16 percent of the deduction claimed on that property. It is due six months after the event that broke the rules. A taking by eminent domain (the government’s power to take land for public use) does not trigger it. Some small changes in classification also do not.
Heirs who claimed the deduction must also file an informational return online. The Minnesota Department of Revenue says it is due 36 to 39 months after death.
An example with round numbers
This is a made-up example. It is simplified and is not tax advice.
A widowed Minnesota farmer dies in 2026. All of her property is in Minnesota. Her estate is worth $6,000,000 after debts. That includes $4,000,000 of farmland that meets every farm deduction rule. She made no gifts in her last three years.
- Taxable estate before the exclusion: $6,000,000.
- Exclusion: $3,000,000.
- Farm deduction: the lesser of $4,000,000 or $2,000,000. So $2,000,000.
- Minnesota taxable estate: $6,000,000 minus $5,000,000 equals $1,000,000.
- Tax at 13 percent: $130,000.
Without the farm deduction, the taxable estate would be $3,000,000. The tax would be $390,000. The deduction saves $260,000 in this example. But if her heir sells the land outside the family within three years, recapture tax would apply.
Her estate is below the 2026 federal exclusion of $15,000,000, so no federal estate tax applies. Still, Minnesota requires the estate to complete a federal Form 706 and attach it to the Minnesota return.
The M706 return and deadlines
The Minnesota return is Form M706. Here are the key dates and rules from the Minnesota Department of Revenue:
- Due date: Both the return and the tax are due nine months after the date of death.
- Extension to file: There is an automatic six-month extension to file. If the IRS grants a longer federal extension, Minnesota follows the longer one.
- Payment: An extension to file is not an extension to pay. Interest runs from nine months after death. The 2026 interest rate is 7 percent.
- Penalties: Late payment and late filing each carry penalties. The late payment penalty is 6 percent of the unpaid tax.
- Federal return: Attach a completed federal Form 706, even if no federal return was otherwise required.
The estate tax often runs alongside probate. Read our guide to Minnesota probate to see how the two fit together.
Minnesota compared with federal and Nebraska rules
The federal estate tax has a much higher exclusion. For deaths in 2026, the IRS lists a basic exclusion of $15,000,000. Many farm families owe Minnesota tax but no federal tax.
Nebraska works differently. It uses an inheritance tax, which is based on who receives the property. See our Nebraska inheritance tax guide.
Planning ideas for farm families
- Lifetime gifts and the 3-year rule. Gifts made more than three years before death leave the Minnesota estate. Start early. Gifts can also change the income tax your heirs pay when they later sell, so check with a tax adviser.
- Use the farm deduction on purpose. Keep the land in class 2a with a proper homestead classification. Make sure the right family members will inherit it. Talk with heirs about the three-year hold before you rely on it.
- Trusts. A revocable living trust (a trust you control and can change) helps avoid probate. It does not by itself lower estate tax. A trust can still be a qualified heir if all current beneficiaries are family members.
- Keep good records. Save deeds, entity papers, property tax statements, and gift records. Your heirs will need proof of three years of ownership before death and three years of class 2a status after.
Learn more on our estate planning page.
Frequently asked questions
What is the Minnesota estate tax exemption for 2026?
It is $3,000,000 per person who dies. That amount has applied to deaths since 2020 (Minn. Stat. 291.016).
Can farmland lower the Minnesota estate tax?
Yes. The qualified farm property deduction can remove up to $2,000,000 more. The exclusion plus the deduction cannot pass $5,000,000 (Minn. Stat. 291.016).
What happens if my heir sells the farm after I die?
If the heir sells to someone outside the family within three years, a 16 percent recapture tax may apply. It is due six months after the sale (Minn. Stat. 291.03, subd. 11).
When is the Minnesota estate tax return due?
Form M706 and the tax are due nine months after death. You can get six more months to file, but interest still runs on unpaid tax.
I live in Nebraska but own Minnesota farmland. Does this apply to me?
It can. Minnesota taxes nonresidents on Minnesota real property and tangible property kept there. Land in a pass-through entity is counted too (Minn. Stat. 291.005).
Talk with us about your plan
Midwest Ag Law helps families in Minnesota and Nebraska plan for estate taxes. Agriculture is our main focus, and we also help non-farm families. We serve Minnesota clients fully remotely. We quote flat fees after a free 30-minute call. Book your free call today.
Sources
- www.revisor.mn.gov/statutes/cite/291.016
- www.irs.gov/businesses/small-businesses-self-employed/estate-tax
- www.revenue.state.mn.us/gift-tax
- www.revenue.state.mn.us/sites/default/files/2026-10/m706-inst-26.pdf
- www.revisor.mn.gov/statutes/cite/291.03
- www.revisor.mn.gov/statutes/cite/291.005
- www.revenue.state.mn.us/qualified-small-business-and-farm-property-deduction
- www.revenue.state.mn.us/recapture-tax
- www.revenue.state.mn.us/estate-tax-due-dates-and-extensions
- www.revenue.state.mn.us/estate-tax-filing-requirement
- www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax
