Minnesota’s Economic News — W/E 9/24/21
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Kiplinger has released its 2019 ranking of the Least Tax-Friendly States for Retirees. Minnesota comes in fifth. Kiplinger explains
The North Star State offers cold comfort on the tax front to retirees. Social Security income is taxable to the same extent as it is on your federal return, though taxpayers with taxable Social Security income can deduct up to $5,150 for joint filers, up to $4,020 for single filers, and up to $2,575 for married taxpayers filing a separate return. Pensions are also taxable, unless they’re from the military. Distributions from IRAs and 401(k) plans are taxable, too.
There is a special income tax deduction for certain senior citizens. Taxpayers 65 and older can deduct up to $9,600 for single filers or $12,000 for joint filers. However, due to the deduction’s phased-out rules, seniors making more than $33,700 (single) or $42,000 (joint) can’t claim this tax break.
Food, clothing, prescription and nonprescription drugs are exempt from the state’s 6.88% sales tax. A few cities and counties also add a sales tax, which can be as much as 2%. The average combined state and local sales tax rate in Minnesota is 7.43%, which is above the national average.
Property tax rates are slightly above average in Minnesota. For a $400,000 home in the state, the owner would pay about $4,897 per year. The state’s Senior Citizen Property Tax Deferral Program allows people age 65 or older, whose household income is $60,000 or less, to defer a portion of the property tax on their home.
For 2019, estates valued at more than $2.7 million are subject to a maximum estate tax rate of 16%. The exemption will rise to $3 million for 2020 and beyond. Assets left to a surviving spouse are exempt.
But don’t bother driving grandma and grandpa to Wisconsin, they come in fourth.
John Phelan is an economist at the Center of the American Experiment.