How does Minnesota state income tax and unemployment insurance work in 2026?

You withhold 5.35% on a single filer's first $33,310, 6.80% from $33,311 to $109,430, 7.85% from $109,431 to $203,150, and 9.85% above that. For a married-filing-jointly employee the bands are wider: the 5.35% band runs to $48,700, and the top rate starts above $337,931. The Minnesota Department of Revenue publishes the schedule each year.

The brackets adjust for inflation, so your 2026 thresholds sit higher than 2025. You follow the employee's W-4MN and remit to the state on the same schedule as your federal deposits. Pay a bonus or commission separately from regular wages and you withhold it at a flat 6.25%.

Keep the W-4MN on file: an employee can claim different allowances for state than for federal, and the form is yours to hold. Get the registration wrong and the state charges you late-deposit penalties on top of the federal ones. The cadence is the trap for a first-time Minnesota employer, because your state deposit frequency tracks your federal one, so a semi-weekly federal filer files state withholding semi-weekly too.

New-hire reporting is a separate obligation you owe the state. You report each new employee to the Minnesota New Hire Reporting Center within 20 days of their start date, which feeds child-support enforcement. It is easy to miss when you are heads-down on tax, and the penalties stack per employee.

You pay UI on the first $44,000 of each employee's wages in 2026 and nothing on the rest of their calendar-year pay. Minnesota sets a different new-employer rate for each industry, so you start near 1.29% if you run a software or services payroll, while most new non-construction employers land at 1.00%. The state then adds its 0.40% base tax rate to whatever rate applies to you. Source: Minnesota Unemployment Insurance, employer tax rates.

You hold the industry rate until you have enough claims history to be experience-rated, after which your own layoffs drive the number, up to 8.90%. The federal layer sits on top: FUTA runs at an effective 0.6% once you take the full credit for paying your Minnesota state unemployment tax on time. The wage base sits higher than most states: Iowa and North Dakota both run different UI bases, so multi-state payrolls need a table, not a rule of thumb.

Minnesota Paid Leave is the big 2026 change. You fund a state-run paid family and medical leave programme through a 0.88% payroll premium on wages, and your eligible workers can take job-protected paid leave of up to 20 weeks combined per year. You cover at least 0.44% of the premium and may deduct up to 0.44% from the employee. Premiums began accruing on 1 January 2026, so it is a live cost on your Minnesota register today. Federal FMLA still applies alongside the state programme if you have 50 or more employees. The full mechanics of both sit in our Minnesota paid leave and sick leave guide.

Two more rules catch you if you hire from out of state. Earned Sick and Safe Time makes you accrue paid sick leave at one hour for every 30 hours worked, up to 48 hours a year. And you pay a statewide minimum wage of $11.41 an hour, with a $9.31 training rate for workers under 20 in their first 90 days. Minneapolis and St. Paul set higher local floors, so where your worker physically sits decides the rate. The full overtime and break rules sit in our Minnesota wage and overtime guide. If you ever have to let that worker go, the rules sit in our Minnesota termination and at-will guide.

Real HR and legal experts handle your Minnesota hires and know the four-bracket withholding, the $44,000 UI wage base, and the 0.88% Paid Leave premium by heart. An actual person, not a chatbot or a pooled queue. You see every cost: state income tax withheld, UI contributions, the Paid Leave premium, and federal employer taxes pass through at cost, itemised and auditable on every invoice. No setup fee, no exit fee. Teamed becomes your employer of record at $599 per employee per month with zero FX mark-up.

Contractor onboarding, EOR payroll, and entity graduation all live on one platform: a Minnesota contractor who converts to W-2 keeps their record, and that same employee can graduate from EOR to your own US entity without switching systems. Because Minnesota carries real withholding, a new Paid Leave programme, and a 30-employee small-employer line in that programme, the load per head runs higher than in a no-tax state, which moves the month your own entity pays off. Run the Crossover Calculator or the Employer Cost calculator to see the month the model flips and the point you graduate to your own entity. EOR is the right model for Minnesota, until it isn't.