Minnesota set to phase out estate tax rates starting July 2025

In a significant move that could reshape estate taxation in Minnesota, the state legislature has proposed a bill aimed at gradually eliminating the estate tax over the next decade. Introduced on February 10, 2025, the bill outlines a systematic reduction of estate tax rates, starting July 1, 2025, and continuing annually until the rates reach zero by June 30, 2034.

The bill specifies a tiered tax structure currently in place, where estates valued at over $7.1 million are taxed at rates ranging from 13 percent to 16 percent, depending on the estate's value. Under the proposed legislation, these rates will be reduced by 1.6 percentage points each year, with the intention of phasing out the estate tax entirely. This change is expected to impact high-net-worth individuals and families, potentially altering estate planning strategies across the state.

Supporters of the bill argue that eliminating the estate tax will encourage wealth retention within Minnesota, stimulate economic growth, and attract affluent residents. They contend that the current tax structure disproportionately affects families with substantial assets, creating a financial burden during an already challenging time of loss.

However, the proposal has faced opposition from various quarters, including fiscal watchdogs and social equity advocates. Critics warn that the elimination of the estate tax could lead to significant revenue losses for the state, which could impact funding for essential services such as education and healthcare. They argue that the estate tax serves as a vital tool for addressing wealth inequality and ensuring that the wealthiest contribute their fair share to the community.

The implications of this bill extend beyond mere tax policy; they touch on broader economic and social issues, including wealth distribution and the sustainability of state funding. As the legislature debates the merits of this proposal, the outcome could set a precedent for how Minnesota approaches taxation and wealth management in the future.

As discussions continue, stakeholders from various sectors are closely monitoring the bill's progress, anticipating potential amendments and the final vote. The outcome of House Bill 170 could significantly influence Minnesota's fiscal landscape and the financial strategies of its wealthiest residents in the years to come.