Self-Employment Tax in Minnesota (2026)

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 6, 2026 · Last updated Aug 6, 2026

Self-employment tax in Minnesota consists of the federal Social Security and Medicare tax (15.3% on net earnings up to annual limits) plus Minnesota's graduated individual income tax administered by the Minnesota Department of Revenue. Minnesota's income tax uses multiple progressive brackets, so higher net earnings are taxed at higher marginal rates. Both federal and state taxes are typically paid via quarterly estimated payments.

Overview of Self-Employment Tax in Minnesota

Self-employment tax for individuals operating businesses in Minnesota involves two main components: federal self-employment tax and Minnesota state income tax. The federal self-employment tax covers Social Security and Medicare contributions for self-employed individuals, mirroring the FICA taxes withheld from employee wages. Minnesota then imposes its own graduated income tax on net earnings from self-employment, calculated from your federal adjusted gross income with Minnesota-specific additions and subtractions.

This guide details the rates, calculation methods, payment obligations, and Minnesota-specific considerations for self-employed individuals, including sole proprietors, partners in a partnership, and members of a limited liability company (LLC) that is not taxed as a corporation. Understanding these obligations is essential for compliance and for avoiding penalties. For a broader look at the federal component, see our main self-employment tax guide and the business tax hub.

Federal Self-Employment Tax (Social Security and Medicare)

The federal self-employment tax rate is 15.3%. This rate is composed of two parts:

• 12.4% for Social Security, applied to net earnings up to an annual wage base (for example, $168,600 for 2024, adjusted for inflation in later years including 2026).
• 2.9% for Medicare, applied to all net earnings from self-employment, with no income limit.

Higher earners also owe an Additional Medicare Tax of 0.9% on wages and self-employment income above threshold amounts set by filing status. Net earnings from self-employment are generally your gross trade or business income minus allowable deductions. For self-employment tax purposes, you multiply your net profit by 92.35% (0.9235) before applying the 15.3% rate; this adjustment reflects that employees do not pay Social Security and Medicare tax on the employer's share.

The federal self-employment tax is reported on IRS Schedule SE (Form 1040). One-half of your self-employment tax is deductible when calculating your adjusted gross income (AGI) for federal income tax purposes. Because Minnesota begins its calculation from federal AGI, this deduction effectively reduces both your federal and Minnesota income tax. See our self-employment tax calculator to estimate the federal portion.

Minnesota State Income Tax on Self-Employment Income

Minnesota imposes a graduated (progressive) individual income tax on residents and on non-residents earning income from Minnesota sources. Self-employment income is included in your federal adjusted gross income, which is the starting point for calculating your Minnesota taxable income after state additions, subtractions, and the standard or itemized deduction. Minnesota uses several income brackets, so the first portion of taxable income is taxed at the lowest rate, with higher income taxed at progressively higher marginal rates up to the top bracket.

The exact rate for each bracket and the income thresholds are set in statute and adjusted annually for inflation by the Minnesota Department of Revenue. Because these figures change each year, confirm the current brackets on the Minnesota DOR income tax rates and brackets page before filing rather than relying on a prior-year rate.

Minnesota also offers credits and subtractions that may reduce your state income tax liability, including credits aimed at working families and dependents. It is important to consult the official DOR publications or a tax professional to determine eligibility, and to consider how forming an LLC in Minnesota affects your filings.

Paying Self-Employment Tax: Federal and Minnesota Estimated Taxes

Because self-employment income is not subject to employer withholding, self-employed individuals generally must pay both federal and Minnesota income taxes through estimated tax payments. These payments are typically made quarterly throughout the tax year.

Federal Estimated Taxes

You must pay federal estimated taxes if you expect to owe at least $1,000 in tax for the year, including your federal income tax plus your self-employment tax. Payments are made using IRS Form 1040-ES, Estimated Tax for Individuals. The payment due dates are generally:

• April 15 (for income earned January 1 to March 31)
• June 15 (for income earned April 1 to May 31)
• September 15 (for income earned June 1 to August 31)
• January 15 of the following year (for income earned September 1 to December 31)

If a due date falls on a weekend or holiday, the deadline shifts to the next business day. You can pay federal estimated taxes online via IRS Direct Pay, through the Electronic Federal Tax Payment System (EFTPS), or by mail with a payment voucher.

Minnesota Estimated Taxes

Similarly, you generally must pay Minnesota estimated taxes if you expect to owe at least $500 in Minnesota income tax after subtracting withholding and refundable credits. Details and payment options are on the Minnesota DOR estimated tax page. The due dates generally align with the federal schedule of April 15, June 15, September 15, and January 15 of the following year.

Minnesota estimated payments can be made electronically through the department's online services or by mail with a voucher. Underpaying estimated tax during the year can result in penalties from both the IRS and the Minnesota DOR, so review your projected liability each quarter.

Minnesota Pass-Through Entity (PTE) Tax

Minnesota offers an elective Pass-Through Entity (PTE) tax that qualifying partnerships and S corporations can choose to pay at the entity level. This election was designed as a workaround to the federal cap on the state and local tax (SALT) deduction: the entity pays and deducts the state tax federally, and electing owners claim a corresponding credit on their Minnesota individual return for their share of the tax paid.

The PTE tax is an option, not a mandate, and it applies to the entity rather than being paid directly by individual owners. Importantly, sole proprietors and single-member LLCs taxed as sole proprietors (disregarded entities) are generally not eligible to make this election, because they are not treated as separate pass-through entities for this purpose. If you operate a multi-member LLC or S corporation, the election can meaningfully change how your business income is taxed. For details and eligibility, consult the Minnesota DOR guidance on the PTE tax and see our comparison of the S-corp election.

Impact of Business Structure on Self-Employment Tax

The business structure you choose affects how your income is taxed, particularly for federal self-employment tax:

• Sole Proprietorship: The business and owner are the same for tax purposes. All net business income is subject to federal self-employment tax and Minnesota income tax.
• Partnership: Each partner's share of the partnership's net earnings is subject to federal self-employment tax and Minnesota income tax.
• Limited Liability Company (LLC):
  • Single-Member LLC: By default a single-member LLC is a disregarded entity (sole proprietorship) for tax purposes. The owner reports income on Schedule C, and net earnings are subject to federal self-employment tax and Minnesota income tax.
  • Multi-Member LLC: By default treated as a partnership; each member's share of net earnings is subject to federal self-employment tax and Minnesota income tax.
  • LLC electing S-Corporation status: An LLC can elect to be taxed as an S-corporation. Owner-employees take a reasonable salary subject to FICA, while remaining profits distributed as dividends are generally not subject to self-employment tax. This can reduce the self-employment tax burden but adds payroll and compliance requirements.

The choice of structure has significant tax implications, so it is advisable to consult a tax professional. For more on structures, see forming an LLC in Minnesota, how to form an LLC, or S-Corp vs. LLC.

Recordkeeping and Compliance

Accurate recordkeeping is essential for self-employed individuals in Minnesota. Keep detailed records of all business income and expenses to correctly calculate net earnings from self-employment, including invoices, receipts, bank statements, and mileage logs. Good records support the deductions you claim and help you prepare accurate federal and state returns.

Compliance also involves:

• Obtaining an Employer Identification Number (EIN): Sole proprietors without employees may use their Social Security Number, but an EIN is generally required for partnerships, multi-member LLCs, and sole proprietors with employees. See how to get an EIN in Minnesota.
• Filing federal returns: Form 1040, Schedule C (sole proprietors/single-member LLCs), Schedule K-1 (partners), and Schedule SE.
• Filing Minnesota returns: Form M1, Minnesota Individual Income Tax Return, or the appropriate non-resident or part-year form.
• Registering for other taxes: If you sell taxable goods or services, register for Minnesota sales tax with the Department of Revenue.
• Maintaining licenses and permits: Keep required Minnesota business licenses current at the state and local level.

Failure to keep proper records or comply with tax obligations can lead to audits, penalties, and interest from both the IRS and the Minnesota DOR. A Minnesota registered agent and orderly records help ensure you receive notices on time.

Frequently Asked Questions

What is the self-employment tax rate in Minnesota?

The federal self-employment tax rate is 15.3% (12.4% for Social Security up to the annual wage base, plus 2.9% for Medicare). Minnesota separately imposes a graduated individual income tax with multiple brackets, administered by the Minnesota Department of Revenue.

How do I pay self-employment tax in Minnesota?

You pay federal self-employment tax and Minnesota income tax through quarterly estimated payments. Use IRS Form 1040-ES for federal amounts and Minnesota's estimated tax vouchers for state amounts. Payments can be made online or by mail.

Is self-employment tax deductible in Minnesota?

Yes, one-half of your federal self-employment tax is deductible when calculating your federal adjusted gross income (AGI). Because Minnesota builds its calculation from federal AGI, this deduction also reduces your Minnesota taxable income.

What is the Minnesota Pass-Through Entity (PTE) Tax?

The Minnesota PTE tax is an elective entity-level tax that qualifying partnerships and S corporations can pay. Electing owners may claim a credit on their Minnesota return. Sole proprietors and single-member LLCs taxed as sole proprietors generally cannot make this election.

Do I need to pay estimated taxes in Minnesota?

Generally yes. If you expect to owe at least $500 in Minnesota income tax after withholding and credits, you must make quarterly estimated payments. Payments are typically due April 15, June 15, September 15, and January 15 of the following year.

Related

• Self-Employment Tax: A Complete Guide (federal hub)
• Self-Employment Tax Calculator
• Business Tax Hub
• How to Form an LLC in Minnesota
• Minnesota Sales Tax
• Self-Employment Tax in Connecticut
• Self-Employment Tax in Kentucky
• Self-Employment Tax in South Carolina
• How to Get an EIN
• S-Corp vs. LLC

Sources

1. IRS - Self-Employment Tax (Social Security and Medicare Taxes).
2. IRS - About Schedule SE (Form 1040), Self-Employment Tax.
3. IRS - Tax Topic 554, Self-Employment Tax.
4. IRS - About Form 1040-ES, Estimated Tax for Individuals.
5. IRS - Questions and Answers for the Additional Medicare Tax.
6. Minnesota Department of Revenue - Individual Income Tax.
7. Minnesota Department of Revenue - Minnesota Income Tax Rates and Brackets.
8. Minnesota Department of Revenue - Estimated Tax.
9. Minnesota Department of Revenue - Pass-Through Entity Tax.
10. Minnesota Department of Revenue - Self-Employed Individuals.
11. Minnesota Office of the Revisor of Statutes - Minnesota Statutes Chapter 290 (Income and Franchise Taxes).
12. Cornell Law School Legal Information Institute - 26 U.S. Code § 1401 - Rate of tax (Federal SE Tax).
13. Cornell Law School Legal Information Institute - 26 U.S. Code § 1402 - Definitions (Net earnings from self-employment).
14. Cornell Law School Legal Information Institute - 26 U.S. Code § 6654 - Failure by individual to pay estimated income tax.
15. Cornell Law School Legal Information Institute - 26 U.S. Code § 3101 - Rate of tax (FICA/Additional Medicare).

LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Laws, fees, and thresholds change; verify current requirements with the IRS and the Minnesota Department of Revenue before acting.