3 Worst States for Taxes on Retirees

High income taxes, sales taxes and taxes on Social Security and other retirement income make states such as Connecticut, Kansas and Minnesota especially tax-unfriendly for retirees.


We analyzed tax policies in all 50 states to find the least tax-friendly states for retirees. The worst places to retire can levy taxes on Social Security benefits and other retirement income, and even on estates and inheritances. Most also impose relatively high property taxes. Here are the three worst states for taxes on retirees.

SEE OUR TAX MAP: State-by-State Guide to Taxes on Retirees

#1: Minnesota

State income tax: 5.35% - 9.85%

Average state and local sales tax: 7.27%

Estate tax/Inheritance tax: Yes/No

Minnesota offers cold comfort on the tax front to retirees. Social Security income is taxable, as are most pensions and distributions from retirement accounts. For 2018, estates valued at more than $2.4 million are subject to a maximum estate tax rate of 16%. Assets left to a surviving spouse are exempt.

#2: Connecticut

State income tax: 3% - 6.99%

Average state and local sales tax: 6.35% (7.75% for certain luxury items)

Estate tax/Inheritance tax: Yes/No

Retirement plans, private pensions and some government pensions are fully taxed in Connecticut. Depending on income, Social Security benefits are subject to state taxes, too. Property taxes are the fourth-highest in the nation. In addition to an estate tax, Connecticut is the only state with a gift tax.

#3: Kansas

State income tax: 3.1% - 5.7%

Average state and local sales tax: 8.6%

Estate tax/Inheritance tax: No/No

Distributions from IRAs, 401(k)s and out-of-state pensions are fully taxed, and Kansas taxes Social Security benefits of high-earners. The combined state and local sales tax rate is the eighth-highest in the U.S., and property taxes are above average. A refund is available to homeowners 55 and older, depending on income.

Check out seven more of the least tax-friendly states for retirement.

SEE ALSO: 10 Best States for Taxes on Retirees