Minnesota is one of the few states that taxes Social Security. That sounds harsh, but most middle-income retirees pay nothing on their benefits thanks to a subtraction. The Minnesota retirement income tax also covers pensions and 401(k) withdrawals at rates that climb to 9.85%.
This guide gives the honest picture: who actually pays tax on Social Security, who does not, and how the rest of your retirement income is taxed.
Minnesota Retirement Income Tax at a Glance
Here is how Minnesota handles each common source of retirement money.
| Income source | How Minnesota treats it |
|---|---|
| Social Security | Taxable, but fully exempt below $108,320 AGI (MFJ) / $84,490 (single); phases out above. |
| Pensions (private, public) | Taxed at 5.35% to 9.85%. |
| IRA and 401(k) withdrawals | Taxed at 5.35% to 9.85%. |
| Senior exclusion | Social Security Subtraction (income-tested); separate subtraction for certain public pensions. |
Be straight about this: Minnesota is less retiree-friendly than most states on paper. It taxes Social Security, and its top rate of 9.85% is among the highest in the country. But the practical reality is gentler than the headline, because the Social Security Subtraction wipes out the benefit tax for most middle-income retirees.
The rest of your retirement income, pensions and account withdrawals, is taxed at Minnesota's graduated rates. There is no broad age exclusion that shields it.
Minnesota Retirement Income Tax: How It Works
Minnesota has a graduated income tax that runs from 5.35% at the bottom to 9.85% at the top. Pensions, IRA withdrawals, and 401(k) distributions are taxed on that scale, stacked with your other income. A large withdrawal can push the top slice of your income into a higher bracket.
Social Security is the part that surprises people. Minnesota is one of the few states that taxes it. But the Social Security Subtraction is what makes the system livable for most retirees.
How the Social Security Subtraction Works
Under the simplified method for tax year 2024, you can subtract all of your Social Security benefits if your adjusted gross income is below $108,320 for married filing jointly, or $84,490 for single and head of household. Below those thresholds, your Social Security is fully exempt, just as it would be in a state that does not tax it at all.
Above the thresholds, the subtraction phases out. It is reduced by 10% for each $4,000 of AGI above the line. So a married couple $40,000 over the threshold loses the full subtraction, and their Social Security becomes taxable. The phase-out targets higher-income retirees, not the typical one.
This is the honest framing: Minnesota does tax Social Security, but most middle-income retirees never feel it. If your AGI sits below the threshold, your benefits come out exempt. The tax mainly reaches retirees with substantial income from other sources.
Pensions and Account Withdrawals
Minnesota taxes pensions, IRA withdrawals, and 401(k) distributions at its graduated rates, with a separate subtraction available for certain public pensions. There is no broad, age-based exclusion that shields private pensions or account withdrawals the way some states offer.
So for most retirees, the real Minnesota tax bill comes from pension and account income, not Social Security. The Minnesota Department of Revenue publishes the subtraction worksheets and the current thresholds, which reindex over time.
One planning note: the thresholds adjust over time, so the exact figures shift year to year. Check the current numbers before you assume you are over or under the line. A couple sitting just above the threshold one year may fall below it the next as the figure rises, restoring the full subtraction. The thresholds and the phase-out rate are the levers that decide your Social Security tax, so they are worth tracking.
What This Means for Paying for Care
If you are drawing on retirement savings to pay for senior care, Minnesota's graduated rates and the Social Security threshold both matter.
A large IRA or 401(k) withdrawal raises your AGI. That does two things: it can push the top of your income into a higher bracket, and it can lift your AGI above the Social Security Subtraction threshold, making part of your benefits taxable. So one big withdrawal can trigger tax on income you did not even withdraw.
That makes spreading withdrawals across years especially valuable in Minnesota. Keeping your AGI below the threshold preserves the full Social Security Subtraction and keeps more income in the lower brackets at the same time.
For the federal mechanics of these withdrawals, see our guide to using retirement accounts for care. To sequence income sources so your AGI stays under the threshold, see building a senior care funding plan. If you are just starting to map the money, begin with how to pay for senior care.
Because the Social Security threshold and the brackets interact, a tax professional can be worth real money here. Running the numbers before a large withdrawal can preserve a subtraction worth thousands.
Where Minnesota Stands for Retirees
Be honest: Minnesota is less retiree-friendly than most states. It taxes Social Security, has no broad age-based exclusion, and carries a top rate of 9.85%. On paper, that is a tough profile for retirees.
But the lived experience is milder for most. The Social Security Subtraction fully exempts benefits for retirees below the AGI threshold, which covers most middle-income households. A couple with an AGI under $108,320 pays no Minnesota tax on Social Security at all, exactly as they would in a no-tax state.
The retirees who feel Minnesota's bite are higher earners: those whose AGI climbs past the threshold and into the upper brackets. For them, both the Social Security tax and the 9.85% top rate come into play.
The takeaway: do not let the "Minnesota taxes Social Security" headline scare you off without checking the numbers. If your AGI is below the threshold, your benefits are exempt, and your real tax bill is on your pension and account withdrawals. Keep your AGI in check, and Minnesota is more reasonable than its reputation.
Frequently Asked Questions
Yes, but most retirees pay nothing on them. Minnesota's Social Security Subtraction fully exempts benefits when AGI is below $108,320 (married filing jointly) or $84,490 (single) for tax year 2024. Above those thresholds, the subtraction phases out by 10% per $4,000 of AGI over the line.
Mainly higher-income retirees. Once your AGI rises above the threshold, the subtraction shrinks and part of your benefits becomes taxable. Middle-income retirees below the threshold pay no tax on their Social Security.
Graduated from 5.35% to 9.85%. Pensions, IRA withdrawals, and 401(k) distributions are taxed on that scale; a separate subtraction is available for certain public pensions.
Yes. Pensions, IRA withdrawals, and 401(k) distributions are taxed at Minnesota's graduated rates. There is no broad age-based exclusion, though certain public pensions get a separate subtraction.
Learn More
- How to Pay for Senior Care
- Building a Senior Care Funding Plan
- Using Retirement Accounts to Pay for Care
Find personalized help planning how to pay for senior care at brevy.com.
The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.