Massachusetts taxes most private pensions and annuities. However, certain government pensions and military retirement benefits are exempt from Massachusetts income tax.
Retirement Income That May Be Exempt
Massachusetts generally allows an exclusion for:
- Contributory pensions from the U.S. Government
- Contributory pensions from the Commonwealth of Massachusetts and its political subdivisions (cities, towns, counties, and other qualifying local governments)
- Noncontributory military pensions
- Certain military survivor benefits
If your retirement income falls into one of these categories, all or part of the pension may be exempt from Massachusetts tax.
Social Security Benefits
Massachusetts does not tax Social Security benefits.
Social Security retirement, survivor, and disability benefits should not be included as taxable income on your Massachusetts Form 1.
Why Is My Pension Showing as Taxable?
For convenience, the software transfers the taxable pension amount reported on your federal return to your Massachusetts return.
Because Massachusetts tax rules differ from federal tax rules, the transferred amount may need to be adjusted if part or all of the pension qualifies for a Massachusetts exemption.
Where Do I Enter an Exempt Pension or Annuity?
If the amount transferred from the federal return is exempt under Massachusetts law:
- State
- Massachusetts
- Income Subject to Tax
- Exempt Pensions and Annuities
Enter the exempt amount in this section to reduce the Massachusetts taxable pension income.
Important Notes
- Most private pensions remain taxable in Massachusetts.
- Certain federal, Massachusetts government, and military pensions may qualify for an exemption.
- Social Security benefits are not taxable in Massachusetts.
- Some retirement distributions may require special Massachusetts adjustments if contributions were previously taxed by Massachusetts.
- Keep copies of your Forms 1099-R and retirement plan documentation with your tax records to support any exemption claimed.
For more information, see: Is my military pension/ retirement income taxable to Massachusetts?