Retiring in Minnesota: what taxes actually cost you
The short answer
On $80,000 of retirement income, Minnesota costs about $10,888 a year across state income, property and sales tax. That ranks 47 of 51, or $4,253 above the median state. State income tax alone is $5,004, which is 6.3% of gross income.
Run it on your own numbers
The figures above use a reference profile. Change them and every number on this page moves, including the ranking.
How Minnesota treats retirement income
Minnesota runs a graduated income tax from 5.35% to 9.85%, with the top rate starting at $183,340 of taxable income for a single filer.
Social Security
Taxed as ordinary income
Pension income
Taxed as ordinary income
401(k) and IRA withdrawals
Taxed as ordinary income
Capital gains
Taxed as ordinary income
Property tax
Averages 1.11% of assessed value, so $4,440 a year on a $400K home.
Sales tax
State rate of 6.88%, before any local addition.
Worth knowing: Taxes Social Security (with exemption for low/middle income).
Where Minnesota sits against the rest
The spread across all 51 runs from $3,280 in Wyoming to $14,004 in Connecticut, a difference of $10,724 a year on the same income.
Five cheapest on these numbers
| State | Total tax |
|---|---|
| Wyoming | $3,280 |
| Nevada | $3,639 |
| Colorado | $4,009 |
| Tennessee | $4,310 |
| Louisiana | $4,678 |
Five most expensive on these numbers
| State | Total tax |
|---|---|
| Connecticut | $14,004 |
| New Jersey | $12,953 |
| Vermont | $12,755 |
| Kansas | $11,108 |
| Minnesota | $10,888 |
Worth keeping in proportion. The gap between the best and worst state here is real money, but it is smaller than the gap between two housing markets, and it is far smaller than the effect of your withdrawal rate. Safe withdrawal rate covers that one.
Common questions
Does Minnesota tax Social Security?
Yes. Minnesota taxes Social Security benefits as ordinary income, which is unusual: most states exempt them entirely. Federal tax may apply on top.
How much tax would a retiree pay in Minnesota?
On $80,000 of retirement income with a $400,000 home and $70,000 of annual spending, Minnesota works out at roughly $10,888 a year across income, property and sales tax. That ranks 47 of 51, against a median of $6,635.
Does Minnesota tax 401(k) and IRA withdrawals?
Yes. Minnesota taxes withdrawals from 401(k)s and IRAs as ordinary income, with no retirement-specific exclusion.
Is Minnesota a good state to retire in for taxes?
One of the most expensive states to retire in. On the reference profile it costs $4,253 more than the median state, and $7,608 more than Wyoming, which is the cheapest. Tax is one input though. Cost of living, housing and proximity to family usually move a retirement budget further than the tax code does.
Retirement taxes in another state
Related: Taxes in retirement, Withdrawal order, Roth conversions, All 51 states.