Minnesota Gift Tax Guide for 2025
- Michael Urch
- 4 days ago
- 7 min read
Updated: 3 days ago
While Minnesota doesn't have a gift tax, certain gifts made within three years of death may be included in your estate for Minnesota estate tax purposes.
The federal gift tax annual exclusion allows you to give up to $19,000 per person per year (increased from $18,000 in 2024) without filing a gift tax return. The federal lifetime gift and estate tax exemption for 2025 is $13.99 million per individual, adjusted for inflation.
If you're planning to give large gifts or are later in life, it’s smart to check in with a financial advisor or tax advisor to make sure it won’t trigger any unexpected taxes down the road. And if you’re doing generational wealth planning, make sure you seek the advice of a professional as you begin the process.
As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. Michael prides himself on being a professional advisor who puts planning before products.
Minnesota Doesn’t Have a Gift Tax—But Gifts Can Affect Your Estate
If you're planning to give a large gift or expect to receive one, you might be wondering whether Minnesota will tax that gift.
The short answer is: Minnesota doesn’t have a separate gift tax. But that doesn’t mean you're off the hook. As a financial advisor here in Minnesota, I help clients think through the bigger picture of legacy planning and estate planning. This includes considering your gifting strategy.
Even though there’s no official “gift tax,” gifts can affect your estate, which may be subject to Minnesota’s estate tax.
Table of Contents
Can Gifts Be Pulled Back Into Your Estate?
Here’s something that surprises a lot of people: Minnesota can include certain gifts in your estate for tax purposes, even if you gave the money away before you passed.
Minnesota doesn’t have a gift tax, but it does follow what's called the “three-year rule.” That means if you give away money or property and die within three years of making that gift, the value of that gift may be added back into your taxable estate.
The goal of the three-year rule is to prevent people from giving everything away right before death just to avoid estate taxes.
For more details, review 291.016 Minnesota Taxable Estate.
Minnesota’s Estate Tax Kicks in at $3 Million
If your estate is worth more than $3 million, you’re looking at potential estate taxes in Minnesota. Minnesota’s estate tax exemption is $3 million per individual.
Married couples can potentially shield more through trusts, but this requires careful planning with an estate attorney.
Here’s what most people don’t realize: Minnesota’s estate tax exemption isn’t portable.
So if one spouse passes away and leaves everything to the other, that $3 million exemption from the first spouse disappears.
When the second spouse dies, the estate is back to just a $3 million exemption—not $6 million.
So if your estate is already near the $3 million threshold — or will be, once you factor in things like life insurance, real estate, and investments — it’s important to be strategic about when and how you give. A well-planned gift can reduce your estate's tax exposure, but a last-minute gift might not help at all.
It’s important to be proactive. Whether you’re planning to make big gifts during your lifetime or leave a legacy to your family, you’ll want to make sure your estate plan accounts for this.
Life Insurance, Real Estate, and Big Gifts All Count Toward Your Estate
Many people don’t realize that their estate value includes more than just their investment accounts. It includes:
The market value of your home
All other assets (including joint property)
Life insurance death benefits—unless held in a trust outside your estate
And, in some cases, large gifts made within three years of death
As you can see, your estate may be larger than you think.
Note: An irrevocable life insurance trust (ILIT) must be properly structured to exclude proceeds from the estate, and professional advice is essential.
Gifting to Avoid Estate Tax? You Still Need a Plan
Some people think they can simply give away their wealth to avoid estate taxes.
But that’s not always the case. Without proper planning, those gifts could still be pulled back into the estate for tax purposes. Before making big gifts, it's important to speak with your financial advisor and an estate attorney to review:
The total value of your estate (including gifts and life insurance)
Whether any assets are likely to trigger tax
Whether a trust might help you reduce your taxable estate
How to pass assets tax-efficiently to your heirs
Even Young Families Should Pay Attention
This may surprise you: Many younger professionals with term life insurance could already be over the $3 million threshold.
If you have $3–4 million in term life coverage and a house and retirement accounts on top of that, you're probably already facing a potential estate tax issue. And that’s before you consider future growth.
Know Where You Stand
The most important thing I tell my clients in Minnesota is this:
If your estate is anywhere near $3 million—or might be in the near future—you need to get started with your estate planning right away.
That doesn’t mean you need a fancy trust tomorrow. But it does mean you should understand what’s in your estate and what your goals are for giving during your lifetime or at death. And your financial advisor should be helping guide you through this process and making sure that you're on top of your estate planning.
2025 Federal Gift and Estate Tax Overview
Exemption Type | Individual Filer | Joint Filers (Married Couple) |
Lifetime Gift and Estate Tax Exemption | $13.99 million | $27.98 million |
Annual Gift Tax Exclusion | $19,000 per recipient | $38,000 per recipient |
Gift to Non-Citizen Spouse | $190,000 | N/A |
Generation-Skipping Transfer (GST) Tax Exemption | $13.99 million | $27.98 million |
Additional Considerations
Sunset Provision: The current exemptions, increased by the Tax Cuts and Jobs Act (TCJA) of 2017, are set to expire on December 31, 2025. Unless Congress acts, the exemption will revert to approximately $7 million per individual (adjusted for inflation) in 2026. Gifts made before the sunset are protected by an anti-clawback rule, ensuring no additional tax if the exemption decreases.
Top Federal Estate and Gift Tax Rate: Remains at 40% for amounts exceeding the exemptions.
For more detailed information, you can refer to the IRS's official resources on estate and gift taxes: Internal Revenue Service
Frequently Asked Questions
What is the three-year rule in Minnesota, and how does it affect beneficiaries?
In Minnesota, the three-year rule is a provision in the state's estate tax law that requires certain gifts made within three years of a person's death to be included in their taxable estate for Minnesota estate tax purposes.
The rule primarily applies to gifts where the donor retained some control or benefit, such as:
Gifts of life insurance policies where the decedent retained incidents of ownership (e.g., the ability to change beneficiaries).
Transfers where the donor retained a life interest (e.g., the right to income from the property).
Transfers where the donor could revoke or reclaim the gift.
Can I give my kids $50,000 tax-free in Minnesota?
Yes, you can gift $50,000 to your children without immediate tax consequences. However, since this exceeds the 2025 federal annual exclusion amount of $19,000 per recipient, you must file IRS Form 709 to report the excess. The amount over $19,000 will count against your federal lifetime gift and estate tax exemption.
Do I have to pay taxes on a gifted car in Minnesota?
Yes, in Minnesota, the recipient of a gifted vehicle may be subject to motor vehicle sales tax based on the vehicle's fair market value at the time of the gift. However, certain exemptions apply, such as gifts between immediate family members. To claim an exemption, a Motor Vehicle Gift Affidavit Form (PS2080) must be completed and submitted during the title transfer process.
When do I have to file a Minnesota estate tax return?
If someone passes away with a Minnesota taxable estate over the $3 million exemption, the estate must file a Minnesota estate tax return (Form M706). This form is used to calculate and report any estate tax owed to the state. Even if no tax is due federally, the estate might still owe taxes in Minnesota.
What is the federal estate tax exemption?
This is the total amount an individual can transfer at death without paying federal estate tax. In 2025, the federal estate tax exemption is $13.99 million per individual. If your estate is under this amount, no federal estate tax is owed — but you may still owe Minnesota estate tax if you're over the state exemption.
What is a gift tax exemption?
This refers to the federal lifetime exemption that covers both gifts made during life and assets passed at death. Any gift above the annual exclusion amount reduces your gift tax exemption unless paid directly for medical or educational expenses.
Are gifts subject to income tax?
While gifts themselves are not subject to income tax, inherited pre-tax retirement accounts (like IRAs or 401(k)s) are. Beneficiaries must pay income tax on distributions from these accounts. Large gifts may also reduce eligibility for income-based tax credits or programs.
Final Thoughts
Even though Minnesota doesn’t impose a gift tax, large gifts can have estate tax implications, especially if you’re giving close to the end of life or if the gift pushes your estate over the exemption threshold.
If you’re considering a large gift—or planning your estate—this is a great time to meet with a financial advisor and an estate attorney. Together, we can help you give intentionally and preserve more of your legacy for your loved ones.
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