Minnesota Payroll Tax Guide (2026)
Minnesota is the biggest payroll change of 2026: Paid Leave premiums began collecting on January 1 at 0.88% of wages up to $185,000, and the state unemployment wage base of $44,000 is already one of the highest in the country.[3]
Minnesota payroll at a glance
Minnesota employers now juggle three state payroll taxes: graduated income tax withholding taken from employees, employer paid unemployment insurance on the first $44,000 of wages, and the new Paid Leave premium that both sides share.[3]
What changed for Minnesota payroll in 2026
Six items moved for Minnesota employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.
2026 Minnesota payroll tax calculator
Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.
Employer pays
Withheld from the employee
State income tax withholding is not included above: it depends on the employee’s Form W-4MN and filing status, so it cannot be estimated from gross pay alone.
Payroll tax rates & the nexus question
Minnesota runs five state payroll taxes. The table below is the whole state layer for 2026.[3]
The state payroll taxes
| Tax | Paid by | 2026 rate | Wage base |
|---|---|---|---|
| UI | Employer | 0.40%–9.30%; 1.00% new | $44,000 |
| Additional assessment | Employer | 14.00% | All wages |
| Special assessment for federal loan interest | Employer | 0.00% | All wages |
| Paid Leave premium, employee share | Employee | 0.44% | $185,000 |
| Income tax withholding | Employee | 5.35%–9.85% | No limit |
For 2026 the base tax rate is 0.40% and the experience rate runs from 0.00 to 8.90%, so a computed rate falls between 0.40 and 9.30%. A 14.00% additional assessment is then applied to that computed tax, and the special assessment for federal loan interest is 0.00% for 2026. New employers are assigned an industry average rate instead of an experience rate, most commonly 1.00% and as high as 8.90% for high experience construction trades.[3]
Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments are withheld at 6.25% when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.[1]
Who has to register
Every individual or organization that pays covered wages in Minnesota must register. Register as soon as the first covered wages are actually paid, and no later than the due date of the first quarterly wage detail report, but do not register before covered wages have been paid.[3] Income tax withholding is administered separately by Minnesota Department of Revenue, so most employers end up with two state account numbers, not one.
Multistate and remote employees
When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.
- 1. Localisation of service→
- 2. Base of operations→
- 3. Place of direction & control→
- 4. Employee’s residence
One remote employee is usually enough. A single person working from home in Minnesota generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.
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Ask a Payroll SpecialistRegistration & return filing
Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.[3]
How to register
- Cross the wage threshold→
- Minnesota Unemployment Insurance employer self-service at ui.mn.gov→
- Receive account number→
- Tax Rate Determination, mailed each December→
- File & deposit online
Every individual or organization that pays covered wages in Minnesota must register. Register as soon as the first covered wages are actually paid, and no later than the due date of the first quarterly wage detail report, but do not register before covered wages have been paid.[3]
Deposit schedule
Deposit frequency follows your federal schedule. Employers who withheld more than $1,500 in the previous quarter deposit semiweekly or monthly in step with their federal deposits, with monthly deposits due by the 15th. Smaller employers deposit quarterly on April 30, July 31, October 31 and January 31, and an employer who withheld $500 or less in the prior year may file annually by January 31.[1]
Returns, reports & due dates
| Form | What it is | Due |
|---|---|---|
| quarterly wage detail report, filed online | Quarterly unemployment return | April 30, July 31, October 31, January 31 |
| Withholding returns are filed electronically through the department’s e-Services… | Income tax withholding returns | Deposit frequency follows your federal schedule. Employers who withhel |
| Annual reconciliation | Year-end withholding reconciliation | January 31 |
| Form 941 | Federal quarterly return | Last day of the month after quarter end |
| Form 940 | Federal unemployment, annual | January 31 |
| New hire report | Report of newly hired employees | Within 20 days of start date |
Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.[3]
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Subject wages vs. exempt payments
Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.[3]
Subject wages
- Salaries, hourly pay, overtime and piece rates
- Commissions, bonuses and incentive pay
- Most cash tips reported by the employee
- Vacation, holiday and paid sick leave when taken as wages
- Severance and payments in lieu of notice
- The cash value of meals and lodging provided as compensation
- Employer contributions to a non-qualified deferred compensation plan
- Wages subject to the employee-paid contributions listed above
Not subject
- Reimbursements of genuine business expenses under an accountable plan
- Employer contributions to a qualified retirement plan
- Employer-paid premiums for accident and health insurance
- Most third-party sick pay after the sixth calendar month
- Payments to a genuine independent contractor
- Workers compensation benefits
The wage base is per employer, per year, not per job. If you hire someone in August who already earned $44,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.
Glossary of key terms
- Taxable wage base
- The slice of each employee’s annual pay that unemployment tax is calculated on. In Minnesota that is $44,000 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
- Paid Leave premium, employee share
- An employee-funded contribution withheld from pay at 0.44%. It is the employee’s money, so it is withheld rather than paid by the employer, but the employer is responsible for remitting it.
- Experience rating
- The method Minnesota Unemployment Insurance Program uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
- New employer rate
- The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
- Form W-4MN
- The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Minnesota Department of Revenue.
- Reserve account
- The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
- Successor employer
- A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
- Localisation of service
- The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
- FUTA credit reduction
- A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
- Supplemental wages
- Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Minnesota payroll tax, layer by layer
Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.
Layer 1: Federal
| Tax | Rate | 2026 base |
|---|---|---|
| Social Security | 6.2% each side | $184,500 |
| Medicare | 1.45% each side | No limit |
| Additional Medicare | 0.9% employee only | Over $200,000 |
| FUTA, standard | 0.6% net | $7,000 |
| Federal income tax | Per Form W-4 | No limit |
Minnesota has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[9]
Layer 2: State
| Tax | Rate | 2026 base |
|---|---|---|
| UI, new employer | 1.00% | $44,000 |
| UI, experienced | 0.40%–9.30% | $44,000 |
| Additional assessment | 14.00% | All wages |
| Special assessment for federal loan interest | 0.00% | All wages |
| Paid Leave premium, employee share, employee | 0.44% | $185,000 |
| Income tax, standard | 5.35%–9.85% | No limit |
| Income tax, supplemental | 6.25% | No limit |
Layer 3, county & city: no payroll tax, but a wage floor
No county or city in Minnesota levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.[10]
The state minimum wage is $11.41 an hour, effective 2026-01-01. The tipped cash wage is $11.41. 2 local jurisdictions set a higher floor. The highest is Minneapolis at $16.37. Minnesota bans tip credits outright, so tipped employees must receive the full cash minimum wage plus their tips. A 90 day training wage of $9.31 applies to workers under 20. Minneapolis and Saint Paul both set higher city minimums; Saint Paul still phases smaller employers in, with micro businesses of five or fewer employees at $14.25 and a youth rate of $13.95 from July 1, 2026. Saint Paul stepped small businesses up to $16.37 and micro businesses to $14.25 on July 1, 2026. Minneapolis rises to $17.02 on January 1, 2027, and the state rate is adjusted for inflation each January 1.[10]
Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.[14]
Minnesota payroll FAQs
The total premium is 0.88% of covered wages, applied up to $185,000 per employee for 2026. An employer may deduct up to 0.44% of wages from the employee and must fund the remainder. Qualifying small employers pay a reduced 0.66% total. Premiums are reported and paid quarterly, and the first payment was due April 30, 2026.
You need 30 or fewer employees in each quarter of the basis period, an average employee wage at or below 150% of the statewide average wage, and complete wage detail reporting throughout that period. The state reviews wage detail for the four quarters ending September 30 of the prior year and assigns the 0.66% rate automatically. If you believe you qualify but were not assigned it, you can appeal.
Take your experience rate, which runs from 0.00 to 8.90% for 2026, add the 0.40% base tax rate, then apply the 14.00% additional assessment to that combined figure. The result is charged on the first $44,000 of each employee’s wages. New employers get an industry average rate instead, most commonly 1.00%.
No. Minnesota law states plainly that no employer may take a tip credit against the minimum wage. Tipped employees must be paid at least the full 11.41 dollar state rate in cash for 2026, or the higher Minneapolis or Saint Paul rate where that applies, plus whatever tips they earn.
Supplemental payments made separately from regular wages are withheld at a flat 6.25% for Minnesota, regardless of what the employee claimed on Form W-4MN. Remember that every employee who completes a federal Form W-4 must also complete Form W-4MN, because the federal form no longer computes Minnesota allowances.
Unemployment wage detail reports, unemployment tax payments and Paid Leave premiums are all due the last day of the month following the quarter: April 30, July 31, October 31 and January 31. Quarterly withholding returns follow the same dates, and W-2 information is due to the Department of Revenue by January 31.
$44,000 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.
$11.41 an hour. 2 local jurisdictions set a higher rate, so check the rate for the location where the employee actually works. The tipped cash wage is $11.41.
April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.
Sources & methodology
- Minnesota Department of Revenue – 2026 Minnesota Withholding Tax Instructions and Tables
- Minnesota Department of Revenue – Minnesota income tax brackets, standard deduction and dependent exemption amounts for tax year 2026
- Minnesota Unemployment Insurance Program – Unemployment Tax Rates
- Minnesota Unemployment Insurance Program – New employer tax rates by industry
- Minnesota Unemployment Insurance Program – Wage detail report and payment due dates
- Minnesota Unemployment Insurance Program – Employer Handbook: New employer registration
- Minnesota Department of Employment and Economic Development – Small employer premium rate
- Minnesota Department of Employment and Economic Development – Minnesota Paid Leave Small Employer Premium Rate Designation
- US Department of Labor, Federal Register – Notice of the Federal Unemployment Tax Act (FUTA) Credit Reductions Applicable for 2025
- Minnesota Department of Labor and Industry – Minimum-wage rate adjusted for inflation as of Jan. 1, 2026
- Minnesota Department of Labor and Industry – Minimum wage in Minnesota
- City of Minneapolis – Minneapolis Minimum Wage Ordinance
- City of Saint Paul, Department of Human Rights and Equal Economic Opportunity – Minimum Wage
- US Department of Labor, Wage and Hour Division – Fact Sheet 17A: Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees
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