Minnesota tips tax calculator: no credit, no deduction

Minnesota gives tipped workers the full minimum before tips — no tip credit is allowed — but taxes those tips on the state return, because the M1 starts from federal AGI and the subtraction bill was not enacted.

Your Minnesota tips

State where you work Qualified tips this year

Voluntary cash and card tips on your W-2, 1099 or Form 4137 — not service charges.

Tax year

2025202620272028

Filing status Other income in your AGI

Wages without the tips, plus any other income (both spouses if filing jointly).

Your occupation The 71 Treasury Tipped Occupation Codes in the final rule (TD 10044).

How you are paid

Employee (W-2) Self-employed (1099)

More options

Itemized deductions (if larger than the standard deduction)

State marginal rate override (%) Leave blank to use the state’s published rate for your bracket.

Federal income tax saved in 2026Deduction $18,000 at 12% $2,160

$18,000 of the $25,000 cap used (72%)

Qualified tips	$18,000
After the $25,000 cap	$18,000
Income phase-out (MAGI $48,000)	$0
Tips deduction	$18,000
Federal tax before → after	$3,580 → $1,420
Social Security & Medicare still due on tips	$1,377
Minnesota 2026: Tips stay taxable in this state	$0
Total income tax saved	$2,160

What the estimate leaves out

The Department of Revenue’s answer

In its 2026 tax-professional Q&A the Department says the federal tips and overtime deductions are figured after federal AGI, and because the Minnesota return begins with that AGI, “all of their tip and overtime income is … taxable to Minnesota” with no addition or subtraction needed. HF 3525 proposed a subtraction equal to the federal deduction; it did not become law.

Minnesota figures

Cash wage / minimum	$11.41 (no tip credit)
In force	July 1, 2026 – December 31, 2026
Next change	January 1, 2027: $11.87
Tipped threshold	Not applicable — no tip credit
Tips on the 2025 return	tips stay taxable in this state. “The Minnesota return starts with FAGI, so all of their tip and overtime income is … taxable to Minnesota.” Source: Minnesota Department of Revenue
Tips on the 2026 return	tips stay taxable in this state. HF 3525 proposed a subtraction; it was not enacted. Source: Minnesota Department of Revenue

Tips on top of the minimum

The Department of Labor and Industry states that no employer may take a tip credit: employees get at least the minimum wage per hour plus any tips. The statewide minimum is $11.41 in 2026 and $11.87 from January 1, 2027; the 90-day training wage for workers under 20 rises to $9.68. Minneapolis and St. Paul set their own higher minimums.

A Duluth server

$14,000 of tips give a $14,000 federal deduction and $1,630 saved; Minnesota taxes them in full. At $11.41 an hour, 30 hours cost the employer $342 before tips; the $150 of tips are extra and the make-up owed is $0.

Check a Minnesota week (no tip credit)

Employer make-up owedMinnesota bans tip credits: $11.41 an hour is owed before tips. $0

Minimum for the hours	$365
Cash wage paid	$365
Tips counted toward the minimum	$0
Your effective hourly pay	$16.10

How the make-up rule works

Where these figures come from

Minnesota Department of Revenue · Minnesota Department of Labor and Industry
2025–26 Tax Pro Annual Webinar Q&A (2026-02)
Minimum Wages for Tipped Employees (table by state) (2026-07-01)
Minimum wage in Minnesota (2026)

Federal rules: how the deduction works. Nearby: Wisconsin, Iowa, South Dakota, North Dakota.

Figures verified against primary sources on October 5, 2026