# Retirement Taxes in Minnesota (2026) > Does Minnesota tax Social Security, pensions or 401(k) withdrawals? The 2026 rules, rates, and what the state tax actually costs a retiree. Source: https://savingslast.com/retirement-taxes-in-minnesota/ Markdown: https://savingslast.com/retirement-taxes-in-minnesota.md Site: SavingsLast, free retirement drawdown calculators. Educational estimates, not advice. **Middle of the pack.** Income tax: graduated, 5.35%–9.85%. Social Security: taxed, with a subtraction that is full below $86,410 AGI (single) / $110,780 (joint) in 2026 and phases out above. Retirement account withdrawals: fully taxable. *Interactive calculator on the page: https://savingslast.com/retirement-taxes-in-minnesota/. The same engine is the MCP tool how_long_will_money_last at https://savingslast.com/mcp.* Seeded with roughly 13% — about 10% effective federal plus 3%, the Minnesota tax on $40,000 of IRA withdrawals at 65 under 2026 rules. Change it to your own rate. ## What Minnesota taxes in retirement | State income tax | Graduated, 5.35%–9.85% | | --- | --- | | Social Security | Taxed, with a subtraction that is full below $86,410 AGI (single) / $110,780 (joint) in 2026 and phases out above | | 401(k) and IRA withdrawals | Fully taxable | | Pensions | Fully taxable | | Military retirement pay | Fully exempt from 2023, any age or income | | Estate or inheritance tax | Estate tax, $3 million exemption | | Average combined sales tax | 8.14% | | Average effective property tax | 1% of home value | Minnesota is one of the few states still taxing Social Security, and its lowest bracket — 5.35% — is higher than several states’ top rate. The estate tax threshold of $3 million is low enough to matter for ordinary homeowners with a portfolio. ## What the state tax actually costs you Take a $500,000 balance and withdraw $2,500 a month, rising with inflation. At an effective federal rate of 10% alone, the money lasts about **18.8 years**. Add Minnesota's 3% and it lasts about **17.9 years** — a difference of roughly **0.9 years**. That is the honest scale of it. State income tax is real money, but for most retirees it changes the answer by months or a couple of years, not decades — and it is usually smaller than the effect of housing costs, which is why a move made purely for income tax often fails to pay for itself. ## The taxes that are not income tax Retirees feel sales and property tax more than working-age households do, because a larger share of a fixed income goes on spending and on staying in a house that is already owned. Minnesota charges an average combined sales tax of about **8.14%** and levies an average effective property tax of about **1%** of a home's value, which is close to the national average. On death: estate tax, $3 million exemption. State thresholds are frequently far below the federal exemption, so an estate that owes nothing federally can still owe here — a house plus a retirement portfolio is often enough to cross the line. ## How long $500,000 lasts here Take a single 67-year-old with $500,000 in an IRA, the average Social Security check and $4,000 a month of spending. In Minnesota that money runs out at 93 and 2 months, 10 months sooner than in a state with no income tax. Counting Minnesota's prices as well, it runs out at 94 and 5 months. [How long $500,000 lasts in every state](https://savingslast.com/how-long-500k-lasts-in-every-state/) compares all 51. ## Should you move for the tax? Compare the whole burden rather than one line of it. States without an income tax raise the money elsewhere — Texas and New Hampshire through property tax, Tennessee and Washington through sales tax — so the saving is often smaller than the headline suggests. Run your own numbers in the calculator above, then look at what the same house costs in each state, what insurance costs, and how far you would be from family and from the specialists you already use. Establishing residency is also a formal exercise, not a preference: high-tax states audit departing retirees on days present, driver's licence, voter registration, where the primary home is, and where a doctor and a dentist are. Half-measures lose. ## Frequently asked questions **Does Minnesota tax Social Security benefits?** Taxed, with a subtraction that is full below $86,410 AGI (single) / $110,780 (joint) in 2026 and phases out above. Minnesota is one of only eight states that still tax Social Security at all, and the income thresholds mean many retirees pay nothing. See [which states tax Social Security](https://savingslast.com/social-security-taxes-by-state/). **Does Minnesota tax 401(k) and IRA withdrawals?** Fully taxable. Pensions are treated separately — Fully taxable. **Does Minnesota tax military retirement?** Fully exempt from 2023, any age or income. See [which states do not tax military retirement](https://savingslast.com/which-states-dont-tax-military-retirement/). **Is Minnesota a good state to retire in for taxes?** Middle of the pack on income tax. A 65-year-old single filer pays about 3% in state income tax on $40,000 a year of IRA withdrawals under the 2026 rules. Average combined sales tax is about 8.14% and effective property tax about 1% of home value. Estate or inheritance tax: estate tax, $3 million exemption. **Does Minnesota have an estate or inheritance tax?** Estate tax, $3 million exemption. This is separate from the federal estate tax and often has a much lower threshold, so it can reach estates that owe nothing federally. ## Similar states for retirees - [Alabama](https://savingslast.com/retirement-taxes-in-alabama/) - [Hawaii](https://savingslast.com/retirement-taxes-in-hawaii/) - [Kansas](https://savingslast.com/retirement-taxes-in-kansas/) - [Maryland](https://savingslast.com/retirement-taxes-in-maryland/) - [Massachusetts](https://savingslast.com/retirement-taxes-in-massachusetts/) - [North Carolina](https://savingslast.com/retirement-taxes-in-north-carolina/) ## Compare and calculate - [All 51 states compared](https://savingslast.com/retirement-taxes-by-state/) - [States that tax Social Security](https://savingslast.com/social-security-taxes-by-state/) - [Is Social Security taxable?](https://savingslast.com/is-social-security-taxable/) - [Retirement withdrawal calculator](https://savingslast.com/retirement-withdrawal-calculator/) - [How long $500k lasts](https://savingslast.com/how-long-will-500k-last-in-retirement/) - [How much do I need to retire?](https://savingslast.com/how-much-do-i-need-to-retire-with-social-security/) SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions. Reviewed for the 2026 tax year. Several states are part-way through scheduled rate cuts or phase-outs, and thresholds are often indexed annually — confirm current figures with the Minnesota tax agency (listed at [taxadmin.org](https://taxadmin.org/state-tax-agencies/)) or a tax professional before acting. The effective rate is a planning figure, not a filing figure.