SF2010

This bill, Minnesota Senate File No. 2010, proposes a reduction in all individual income tax rates by one percentage point. It amends Minnesota Statutes 2024, section 290.06, subdivisions 2c and 2d.

Key Provisions:

1. Tax Rate Reductions:
   • The bill reduces each individual income tax rate immediately by one percentage point, affecting different income brackets for married filing jointly, unmarried individuals, and heads of households.

• Current vs. Proposed Rates:
  • Lowest bracket: Reduced from 5.35% to 4.35%
  • Second bracket: Reduced from 6.8% to 5.8%
  • Third bracket: Reduced from 7.85% to 6.85%
  • Highest bracket: Reduced from 9.85% to 8.85%

1. Temporary Adjustments for 2025 & 2026:

   • For tax year 2025, tax rates will be slightly increased:
     • 4.35% → 4.85%
     • 5.8% → 6.3%
     • 6.85% → 7.35%
     • 8.85% → 9.35%
   • For tax year 2026, rates will decrease slightly from 2025 levels but remain above the initial 1% reduction:
     • 4.35% → 4.6%
     • 5.8% → 6.05%
     • 6.85% → 7.1%
     • 8.85% → 9.1%

2. Tax Computation for Non-Residents:

   • The bill maintains the method for non-resident individuals to compute their Minnesota income tax liability by applying Minnesota-source federal adjusted gross income in a proportional formula.

3. Impact on Pass-Through Entities:

   • Non-residents with ownership in pass-through entities that elect to pay taxes at the entity level must include additional tax additions and subtractions when computing their Minnesota tax liability.

Overall Impact:

• The initial tax reduction benefits all taxpayers across income brackets by lowering rates by one percentage point.
• Temporary rate increases apply for 2025 and 2026, before returning to slightly reduced levels in 2027.
• This change aims to provide income tax relief while managing state budgetary concerns.

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