Updated October 5, 2026. Quick answer: Yes. Minnesota taxes interest and dividends as ordinary income, and the Department of Revenue prints “Income Tax Rates for 2026” of 5.35%, 6.80%, 7.85% and 9.85%. Net investment income over $1 million also owes a separate 1% tax.
How Minnesota treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule |
| 2026 rates | 5.35%, 6.80%, 7.85% and 9.85%; the 2025 rate table is not in the documents read |
| Other states’ bonds | Complete Schedule M1M if you “Received interest from municipal bonds of another state or its governmental units” |
| Federal obligations | “Received interest from a federal government source” is a Schedule M1M subtraction |
| Net investment income tax | “Minnesota Net Investment Income Tax (NIIT) of 1%” on “net investment income exceeding $1 million” |
A $20,000 example
Dividends and interest of $20,000 that fall inside the lowest, 5.35% bracket add $20,000 x 5.35% = $1,070, before the standard deduction. The 1% investment income tax does not reach it, since it applies only above $1 million.
What changes in 2026
The Department prints new bracket amounts for 2026, recalculated each year for inflation; the four rates are unchanged.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Minnesota taxes capital gains, whether Minnesota taxes pensions, how Minnesota taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Form M1 Instructions: https://www.revenue.state.mn.us/sites/default/files/2026-10/m1-inst-25.pdf
- Income Tax Rates and Brackets: https://www.revenue.state.mn.us/minnesota-income-tax-rates-and-brackets
- Net Investment Income Tax (NIIT): https://www.revenue.state.mn.us/net-investment-income-tax-niit
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.