Updated October 5, 2026. Quick answer: Yes. Minnesota taxes a non-grantor trust as a resident trust when it was created by the will of a Minnesota decedent or when “the grantor was a Minnesota resident” at the time the trust became irrevocable (and, for a trust that became irrevocable or was first administered in Minnesota before 1996, when it is administered in Minnesota), and it taxes other trusts only on income allocable to Minnesota.
How Minnesota treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Minnesota taxes the income of non-grantor trusts that file their own return, and the trustee files and pays the tax. The source says: “the trustee of a trust or the personal representative” must file Form M2 and pay the tax when a return is required. |
| Who counts as a resident trust | For trusts that became irrevocable after 1995, the statute covers an irrevocable trust whose grantor was a Minnesota resident, or a trust created by the will of a Minnesota resident, and it excludes grantor type trusts. The source says: “the grantor of which was domiciled in this state at the time” the trust became irrevocable. |
| Rate on trust income | For 2025 the Form M2 tax table runs from 5.35% on the lowest bracket to 9.85% on the top bracket. |
| Minnesota net investment income tax | A trust with investment income above the printed threshold also completes Schedule NIIT and enters the result on line 12 of Form M2. The source says: “over $1,000,000 of investment income during the tax year” triggers Schedule NIIT. |
| Distribution deduction | Minnesota follows federal distributable net income: when income is distributed, adjustments pass to beneficiaries “in proportion to their share of distributable net income” and the beneficiary reports the income distributed. |
| Nonresident trusts | A trust that is not a statutory resident still files Form M2 when it has $600 or more of gross income allocable to Minnesota, and non-Minnesota income is figured on Schedule M2NM. The source says: “gross income allocable to Minnesota” triggers the filing duty. |
| Return to file | The trustee files Minnesota Form M2, Income Tax Return for Estates and Trusts, after completing the federal Form 1041. The source says: “must file Minnesota Form M2” when the $600 threshold is met. |
A $10,000 example
The tax on $10,000 of taxable income a trust keeps depends on the bracket it lands in. Taxed wholly at the lowest printed rate, 5.35%, the tax is computed as $10,000 x 5.35% = $535; taxed wholly at the highest, 9.85%, it is computed as $10,000 x 9.85% = $985. The state’s own schedule decides which applies. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The 2026 Minnesota session updated state law to follow the Internal Revenue Code as amended through May 1, 2026, with remaining nonconformity adjustments figured on Schedules M2NC, M2SBNC and KFNC.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Minnesota taxes retirement income, whether Minnesota taxes pensions, what a living trust costs in Minnesota, trust income tax by state, and federal trust tax brackets.
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Answer againSources
- 2025 Estate and Trust Income Tax Instructions, Form M2 (Minnesota Department of Revenue): https://www.revenue.state.mn.us/sites/default/files/2026-07/m2-inst-25.pdf
- Minnesota Statutes section 290.01, definitions, subd. 7b resident trust (Office of the Revisor of Statutes): https://www.revisor.mn.gov/statutes/cite/290.01/pdf
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.