Lease tax by state
How is a car lease taxed in Minnesota?
Tax on the total of all payments is collected up front. The Minnesota state-level rate is 6.875%.
- Method
- Up-front tax on the total of all payments
- State base rate
- 6.875% (excludes local add-ons)
- Down payment taxed?
- Yes — cash down is taxed; qualifying rebates are not
- As of
- 2026-10-03
What this means for your lease
In plain English: tax on the total of all payments is collected up front. Minnesota's state-level lease tax rate is 6.875% (before any local add-on).
Cash you put down as a cap-cost reduction IS taxed in Minnesota, so putting more cash down does not escape the tax. A qualifying rebate applied as a cap-cost reduction and positive equity from a qualifying trade-in are not taxed.
The detail
Quirk: For leases of more than 28 days, Minnesota collects the ENTIRE tax UP FRONT on the total lease price (MN Stat. 297A.815). Total lease price = vehicle value minus rebates, residual value and trade-in allowance, plus taxable add-ons and interest/finance charges. Any rebate, regardless of origin, is deducted from the vehicle value, so a rebate applied to the lease is not taxed. Cash down payments do NOT reduce the vehicle value, so cash down is effectively taxed. A trade-in reduces the vehicle value only if the lessee owns it (not a leased vehicle) and trades it to the lessor named on the lease. Lessor collects tax in full at lease signing. Does not apply to rentals of 28 days or less or to vehicles with a GVWR over 10,000 lbs.
Local add-ons
Local sales taxes (and the metro-area transit/vehicle taxes) apply if the vehicle is principally garaged in a taxing jurisdiction; added on top of 6.875%.
See what this does to your true monthly cost
Minnesota's tax method changes the real cost of a lease — sometimes more than the headline payment does. Drop your numbers into the calculator (we preselect Minnesota) to fold the tax into one honest, comparable effective monthly figure.
Estimate my Minnesota lease cost →Source: revenue.state.mn.us · High confidence · Reviewed 2026-10-03. Tax method is researched and cited per state; rates are state-level and exclude local add-ons. This is an estimate — verify with your dealer or the Minnesota Department of Revenue before you sign.
Compare nearby and similar state tax methods
State borders can change how the same advertised lease is taxed. Compare these guides, or browse the complete 50-state and DC directory.