Bank Gap by State
The Bank Gap in Minnesota
Minnesota's top income-tax rate of 9.85% is among the highest in the country, so the after-tax math on savings interest matters more here than the state's otherwise near-average cost of living would suggest.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before MN tax
$1,005/yr
on a $25,000 balance
After MN 9.85% tax
$906/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Minnesota's 9.85% top income-tax rate on the additional interest, you keep about $906. Because Treasury interest is exempt from Minnesota income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After MN tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $181 |
| $10,000 | $38 | $440 | $402 | $362 |
| $25,000 | $95 | $1,100 | $1,005 | $906 |
| $50,000 | $190 | $2,200 | $2,010 | $1,812 |
| $100,000 | $380 | $4,400 | $4,020 | $3,624 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After MN tax" column applies MN's 9.85% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Minnesota changes the math
Minnesota taxes interest income at a top rate of 9.85%. Treasury interest is generally exempt from that tax, giving higher-income Minnesota savers a substantial after-tax edge from T-Bills or a government money market fund over a comparably priced taxable account.
Living costs in the Twin Cities run above the rest of Minnesota, which raises typical emergency-fund sizing — and the dollar value of the Bank Gap — for savers in that metro relative to greater Minnesota.
Cost of living in Minnesota is near the national average, higher in the Twin Cities, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Minnesota taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Minnesota tax high-yield savings account interest?
Is a high-yield savings account worth it in Minnesota?
Are T-Bills better than a HYSA for Minnesota savers?
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Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.