Minnesota's income tax is a graduated tax, with four rates: 5.35 percent, 7.05 percent, 7.85 percent, and 9.85 percent. The rates are applied to income brackets that vary by filing status. The state’s combined average sales tax rate consists of its state rate of 6.875 percent and average local rate of 0.58 percent. Additionally, pensions, including federal pensions, received while a Minnesota resident are taxable by Minnesota regardless of where your pension was earned. Overall, Minnesota ranks in the top ten states for high taxes.