How Massachusetts taxes retirement income
Massachusetts does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are taxed as ordinary income. Social Security benefits fully excluded from Massachusetts income. Massachusetts and U.S. government contributory pensions (state, local, federal, military) are fully exempt; most private-sector and out-of-state government pensions are taxed at the ordinary 5% rate. 401(k)/IRA withdrawals are taxable at 5% to the extent they exceed previously Massachusetts-taxed contributions (basis); MA does not allow a deduction for original IRA contributions, so basis is recovered tax-free first. Massachusetts conforms to federal contribution/rollover provisions as of January 1, 2022.
Retirement income tax in Massachusetts, at a glance
| Income type | Taxed by Massachusetts? |
|---|---|
| Social Security | No |
| Pensions | Yes |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | Estate tax (exemption $2,000,000) |
| Avg. property tax rate | 1% of home value |
Does Massachusetts tax Social Security benefits?
No. Massachusetts does not tax Social Security benefits.
Does Massachusetts tax pensions and 401(k) or IRA withdrawals?
Yes. Massachusetts taxes pension income and 401(k)/IRA withdrawals as ordinary income. Social Security benefits fully excluded from Massachusetts income. Massachusetts and U.S. government contributory pensions (state, local, federal, military) are fully exempt; most private-sector and out-of-state government pensions are taxed at the ordinary 5% rate. 401(k)/IRA withdrawals are taxable at 5% to the extent they exceed previously Massachusetts-taxed contributions (basis); MA does not allow a deduction for original IRA contributions, so basis is recovered tax-free first. Massachusetts conforms to federal contribution/rollover provisions as of January 1, 2022.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Massachusetts taxation of retirement income (Social Security, pensions, 401(k)/IRA): Massachusetts Department of Revenue / Taxation.
- Massachusetts estate / inheritance tax: Massachusetts tax authority.