Entrepreneurs in Minneapolis, MN: taxes and retirement for 2026

For solo founders and small-business owners in Minneapolis, MN. Minnesota has a graduated state income tax for 2026: 5.35% to 9.85% (top rate starts at $203,151 for single filers). Here are the 2026 rules, a worked example and the official sources.

What's different in Minneapolis

Local income tax: No city income tax in Minneapolis.
Minnesota rideshare (TNC) driver minimum compensation (state law, preempts city rules): Since Dec. 1, 2024, rideshare companies must pay drivers at least $1.28 per mile and $0.31 per minute while a passenger is in the car, with at least $5 for any trip with a passenger; tips are extra. These rise to $1.33, $0.32 and $5.20 on Jan. 1, 2027. Drivers also get written deactivation notices and 30 days to appeal. Minn. Stat. 181C.10 bars cities such as Minneapolis from adopting their own TNC driver rules.
Also worth knowing: The City licenses specific business types, such as alcohol, contractors, food, lodging (including short-term rentals) and vehicles, and its licensing page does not say whether a home-based self-employed person needs a general business license (https://www.minneapolismn.gov/business-services/licenses-permits-inspections/business-licenses/). Minneapolis's minimum wage is $16.37 an hour for all employers from January 1, 2026 (https://www.minneapolismn.gov/news/2025/december/minimum-wage). Minnesota is not among the states with city- or county-level income or payroll taxes, per the Tax Foundation (secondary source; no official state statement found) (https://taxfoundation.org/data/all/state/state-income-tax-rates). The state preemption text is at https://www.revisor.mn.gov/statutes/cite/181C.10.

Minnesota rules for entrepreneurs

State income tax (2026): Minnesota has a graduated state income tax for 2026: 5.35% to 9.85% (top rate starts at $203,151 for single filers). 2026 single-filer brackets: 5.35% up to $33,310; 6.80% from $33,311 to $109,430; 7.85% from $109,431 to $203,150; 9.85% from $203,151 and up.
State estimated tax: You must make estimated payments if you expect to owe $500 or more in Minnesota income tax after withholding and refundable credits. Same dates as federal (April 15, June 15, Sept. 15, 2026, and Jan. 15, 2027). To avoid a penalty, pay 90% of this year's tax or 100% of last year's (110% if federal AGI is over $150,000). Form Estimated tax payment (pay online through Revenue's e-Services or mail a printed payment voucher).
Rideshare (TNC) driver minimum pay and deactivation law: Since Dec. 1, 2024, rideshare drivers must be paid at least $1.28 per mile and $0.31 per minute (minimum $5.00 per ride), not counting tips. Rates rise to $1.33 per mile, $0.32 per minute, and $5.20 per ride on Jan. 1, 2027. Drivers get 80% of cancellation fees and have the right to written notice and an appeal before deactivation.
Employee misclassification law (Minn. Stat. 181.722 and 181.723): Businesses may not misclassify employees as contractors or make workers sign agreements that do so. Penalties are up to $10,000 per misclassified worker and up to $10,000 per violation. Construction workers count as employees unless they meet all 14 legal requirements for contractor status.
Minnesota Paid Leave: self-employed opt-in: Paid Leave started Jan. 1, 2026. Self-employed people and independent contractors can opt in for up to 12 weeks of family or medical leave (20 weeks combined) by paying 0.88% of prior-year net self-employment earnings, a year in advance. They must stay in for at least 104 weeks before opting out.
State retirement program: Minnesota Secure Choice Retirement Program is live. It is built around W-2 employers and does not cover 1099 contractors through the employer mandate.

Federal rules for 2026

Entity choice changes your taxes

A single-member LLC is taxed like a sole proprietorship unless it elects S-corp status. The S-corp can lower payroll tax but adds payroll, a separate return and a reasonable-salary requirement.

Retirement as a tax lever

With no employees, a Solo 401(k) allows up to $72,000 in 2026. With employees, a SEP IRA or a 401(k) must generally cover eligible staff too.

Quarterly estimated taxes

No one withholds tax from self-employment income, so you generally pay estimates four times a year if you expect to owe $1,000 or more. For 2026 income the federal dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Paying 100% of last year's tax (110% if your AGI was over $150,000) in four equal installments avoids the underpayment penalty.

Self-employment tax

On top of income tax, self-employed people pay 15.3% on 92.35% of net profit: 12.4% Social Security up to the 2026 wage base of $184,500, plus 2.9% Medicare with no cap. Half of it is deductible.

A worked example

A solo founder with $200,000 of profit in 2026
Self-employment tax as a sole proprietor	$28,234
Solo 401(k) maximum as a sole proprietor	$61,677
Payroll tax saved as an S-corp on a $100,000 salary	$12,934
Solo 401(k) maximum as that S-corp	$49,500

Federal figures only. S-corps add running costs (payroll, an 1120-S return, state fees) not shown here. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.

Free tools

S-corp vs Solo 401(k) calculator Solo 401(k) vs SEP IRA calculator Quarterly tax calculator

Guides by job and platform

Solo founders Small business owners Online sellers Food truck owners Self-Employed Workers

Amazon (Selling on Amazon) eBay Gumroad Kajabi

Questions

Is there a local income tax in Minneapolis?

No city income tax applies in Minneapolis. Minnesota has a graduated state income tax for 2026: 5.35% to 9.85% (top rate starts at $203,151 for single filers).

What Minneapolis rules protect gig workers and freelancers?

Minnesota rideshare (TNC) driver minimum compensation (state law, preempts city rules): Since Dec. 1, 2024, rideshare companies must pay drivers at least $1.28 per mile and $0.31 per minute while a passenger is in the car, with at least $5 for any trip with a passenger; tips are extra. These rise to $1.33, $0.32 and $5.20 on Jan. 1, 2027. Drivers also get written deactivation notices and 30 days to appeal. Minn. Stat. 181C.10 bars cities such as Minneapolis from adopting their own TNC driver rules.

Do entrepreneurs in Minnesota pay state income tax?

Minnesota has a graduated state income tax for 2026: 5.35% to 9.85% (top rate starts at $203,151 for single filers). 2026 single-filer brackets: 5.35% up to $33,310; 6.80% from $33,311 to $109,430; 7.85% from $109,431 to $203,150; 9.85% from $203,151 and up.

When are Minnesota estimated tax payments due for 2026?

You must make estimated payments if you expect to owe $500 or more in Minnesota income tax after withholding and refundable credits. Same dates as federal (April 15, June 15, Sept. 15, 2026, and Jan. 15, 2027). To avoid a penalty, pay 90% of this year's tax or 100% of last year's (110% if federal AGI is over $150,000). The state form is Estimated tax payment (pay online through Revenue's e-Services or mail a printed payment voucher).

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Sources

State and local facts researched from official sources and independently re-checked; last verified October 2026, next scheduled review 2027-01-02. Educational information for 2026, not tax, legal or investment advice. Rules change; check the official sources listed and a tax professional for your situation. Gigaverse AI, Inc. is a financial technology company, not a bank, and not itself a registered investment adviser or broker-dealer.