Minnesota and her various cities frequently make “best of” lists every year. Last year, however, Kiplinger’s performed a study of state taxes to determine which 10 states retirees, or those on the cusp of retirement, should avoid and Minnesota came in at number 4.
It turns out that we are one of five states that taxes Social Security income the same way the federal government does – up to 85 percent. All pensions, regardless of source (yes, even military) are taxed and, although food, prescription medications and clothing aren’t taxed at the state level, some cities and counties tack on their own tax on these items.
To top it off, Kipplinger’s mentions the new tax rate added in 2013, where folks who earn more than $150,000 if single and $250,000 if they file jointly, moved into a tax rate of 9.85 percent.
But that’s not all. Another reason Minnesota made the list of the 10 Worst Places to Retire is our high property tax rate and the estate tax.
While all this is going on here, other states have gone in the opposite direction specifically to lure this huge, wealthy and politically active demographic. Maine, for instance, changed its tax laws to exclude more of a retiree’s social security income from state taxes. Nebraska’s similar decision will kick in this year.
Here is the entire list of the 10 Worst Places to Retire:
1. Rhode Island
9. New Jersey
10. New York