This article takes a look at the 5 states with the highest taxes on retirement income in the US. If you wish to check out our detailed analysis of the tax reality in the US, you may go to 20 States with the Highest Taxes on Retirement Income in the US.
5. Massachusetts
Social Security: Not Taxable
Pensions: Taxable (with exemptions)
401(k) and IRA Distributions: Taxable
In Massachusetts, income from an IRA, 401(k), 403(b), or any other type of retirement savings account is taxed at a flat rate of 5%. Moreover, income exceeding $1 million is subject to an extra 4% tax.
4. Kansas
Social Security: Partially Taxable
Pensions: Taxable (except public pensions)
401(k) and IRA Distributions: Taxable
In Kansas, retirement income from pensions, 401(k)s, or IRAs is fully taxable at a low of 3.1% to a high of 5.7%. Social Security retirement benefits are taxable for taxpayers with an AGI over $75,000. Public pension income is fully exempt from taxation in the state.
3. Utah
Social Security: Taxable
Pensions: Taxable
401(k) and IRA Distributions: Taxable
Utah has a flat income tax rate of 4.65%. Most forms of retirement income, including Social Security retirement benefits, are taxed in the state. Utah Gov. Spencer Cox recently signed into law a bill to lower the state’s income tax rate from 4.65% to 4.55%.
2. Montana
Social Security: Taxable (Partially deductible)
Pensions: Taxable
401(k) and IRA Distributions: Taxable
All three types of retirement income are taxed in the state of Montana. Retirees can deduct up to $5,500 of qualified retirement income. The income tax rate runs at a low of 4.7% and a high of 5.9%.
1. Minnesota
Social Security: Partially Taxable
Pensions: Taxable
401(k) and IRA Distributions: Taxable
Most types of retirement income are taxed in the state of Minnesota. Even Social Security may be partially taxable. According to AARP, taxpayers with taxable income up to $78,000, or $100,000 for a couple, are exempt from paying state taxes on their benefits. Those who earn more than these amounts may qualify for a partial tax break. The state has a graduated state individual income tax, with rates ranging from 5.35% to 9.8%. Making it to the top of our list of states with the highest taxes on retirement income in the US, even the lowest income tax bracket is higher when compared to many other states in the country.
If you wish to check out more states and our detailed analysis of the tax reality in the US, you may go to 20 States with the Highest Taxes on Retirement Income in the US.
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