Massachusetts Retirement Income Tax: 2026 Guide

Massachusetts does not tax Social Security, and it does not tax a contributory government pension, including a federal FERS or CSRS pension.1 But it does tax private pensions, IRA withdrawals, 401(k) distributions, a federal retiree's Thrift Savings Plan, and a state or municipal employee's 457 deferred compensation, all at a flat 5 percent.1 The plan your money sits in, not the name of the employer, decides the bill.

The traps in Massachusetts retirement income tax are the two accounts that look as if they share the pension's exemption and do not. A federal retiree's TSP and a Massachusetts public employee's 457 are both fully taxable here, even though the pension alongside them is exempt.1

In This Guide

• The Short Answer
• Massachusetts Retirement Income Tax at a Glance
• How Massachusetts Taxes Retirement Income
• Which Pensions Are Exempt
• The Surtax on High Incomes
• What You Still Pay in Massachusetts
• Frequently Asked Questions
• Next Steps1

The Short Answer

Massachusetts is a split state for retirees. It depends entirely on where your pension comes from.

Social Security is exempt. So are contributory government pensions: pensions from the Commonwealth of Massachusetts and its cities and towns, the U.S. government, and the contributory plans of other states that meet a reciprocity test, according to the Massachusetts Department of Revenue.1 The word doing the work there is contributory: DOR taxes senior U.S. judges' pension distributions precisely because those pensions are not contributory.1

Private pensions, IRA withdrawals, and 401(k) distributions are taxable, at the state's flat 5 percent rate.1 So are two accounts people expect to be exempt: the federal Thrift Savings Plan, which is fully taxable in the year paid, and a 457 deferred compensation plan, the kind set up for Massachusetts government employees, which is included in gross income.1 The 5 percent rate is flat, so a 75-year-old with a corporate pension pays the same rate on it as a working 40-year-old pays on wages.1

Massachusetts Retirement Income Tax at a Glance

Here's how each common income source is treated at the state level.

For pensions, the line is not government versus private, which is where most summaries go wrong. It runs between a contributory government plan and everything else.1 A retired Boston police officer's pension is exempt while the 457 she saved into alongside it is taxed, and a retired federal employee's FERS pension is exempt while his TSP is taxed.1

How Massachusetts Taxes Retirement Income

Massachusetts applies a flat 5 percent income tax to taxable income, including private pensions, IRA withdrawals, and 401(k) distributions.1 There's no graduated bracket below the surtax line.

One wrinkle matters for IRAs. The taxable amount of a Massachusetts IRA distribution can differ from the federal amount, because Massachusetts doesn't allow a deduction for IRA contributions.1 You already paid Massachusetts tax on the money you contributed, so the state doesn't tax it again on the way out. The part of a distribution that represents those previously taxed contributions is excluded, so your Massachusetts taxable IRA income can be lower than the federal figure, and the calculation takes some bookkeeping. Keep records of your contributions, or have your preparer track them.

Which Pensions Are Exempt

The exemption hinges on the kind of plan paying the pension.1

Exempt government pensions include:

• Contributory pensions from the Commonwealth of Massachusetts and its cities, towns, and political subdivisions, including MBTA, police and fire pensions
• Contributory pensions from the U.S. government, including federal civil service (FERS and CSRS), but not the Thrift Savings Plan
• U.S. military retirement pay
• Contributory public-employee pensions from another state, but only if that state passes the reciprocity test

Military retirement pay is excluded from Massachusetts gross income even though it is included in federal gross income.1

The out-of-state category is the one to check. A public-employee pension from another state is deductible in Massachusetts only if that state does not tax its own residents on Massachusetts contributory public pensions, either through a specific exclusion for them or by having no income tax. Whether a state passes depends on its own law, so confirm your specific state pension with the Massachusetts Department of Revenue before assuming it's exempt.1

The two accounts that look exempt and are not

This is where a Massachusetts retiree loses money by reading a summary instead of the rule.

The Thrift Savings Plan. A federal retiree's contributory FERS or CSRS pension is excluded from Massachusetts gross income. The TSP is not: DOR treats Thrift Savings Plan distributions as fully taxable in the year paid.1 So the same retiree has one federal retirement stream that Massachusetts ignores and another it taxes at 5 percent. If you have been budgeting your TSP withdrawals as tax-free in Massachusetts, they are not.

457 deferred compensation. Massachusetts sets up 457 plans for its government employees, alongside their pension. Distributions from a 457 are included in Massachusetts gross income in the year paid, even though the same employee's state pension is excluded.1 A retired teacher or town employee drawing on both has one exempt stream and one taxable one.

The rule underneath both is the same: the exclusion turns on the plan being contributory, which is also why DOR taxes senior U.S. judges' pension distributions, non-contributory plans that are subject to Massachusetts income tax and withholding.1

What is exempt that people miss

The exclusions run further than the headline pair, and three of them are worth naming.

Tier I and Tier II railroad retirement benefits are exempt from Massachusetts taxation.1 MBTA pension distributions are excluded, DOR treating them as distributions from an employee contributory pension.1 And on the public-safety side, Massachusetts police and fire department pensions are contributory funds of the Commonwealth or its subdivisions, so retiree distributions are excluded on the same footing; separately, annuities paid to the dependents of police officers, firefighters and certain other public employees killed while performing their duty are not taxable, a city or town may grant an untaxed annuity to a surviving spouse not entitled to a retirement allowance, and survivor annuity benefits paid on account of a public safety officer killed in the line of duty are fully excluded from both federal and Massachusetts gross income.1

The exemption also survives the pension holder. A widow or widower drawing a survivor annuity on a Massachusetts state or local, or a federal, contributory pension is covered by the same exclusion.1

What's not exempt: private-sector pensions, IRA and 401(k) withdrawals, the federal Thrift Savings Plan, and 457 deferred compensation. These are taxed at the flat 5 percent rate.1

The 4% Surtax on High Incomes

This one only starts at a seven-figure income, but it's worth knowing. Massachusetts adds a 4 percent surtax on taxable income above $1,107,750 for tax year 2026.1 That threshold is the tax year 2026 figure, so check the figure for the year you are filing with the Massachusetts Department of Revenue.

The surtax matters for retirees mainly in one-off years: selling a business, realizing a large capital gain, or taking a very large retirement-account distribution that pushes total taxable income over the threshold. In those years, income above the line that is taxed at the 5 percent rate also carries the 4 percent surtax, 9 percent in all on the excess.1 Spreading large withdrawals across years can keep you under the threshold, so plan big distributions with your tax preparer.

What You Still Pay in Massachusetts

Beyond the state income tax, the usual taxes apply.

Federal income tax. Massachusetts exemptions stop at the state line: the state, local and military pensions Massachusetts excludes are still included in federal gross income, so the IRS taxes them.1 Social Security benefits become federally taxable only when your modified adjusted gross income (adjusted gross income with certain adjustments, one of which adds back tax-exempt interest) plus one-half of your benefits passes a base amount set by filing status, and at most 85 percent of them is ever included in gross income.2 One filing status gets no cushion: the base amount is zero for someone the tax code treats as married at the close of the year who does not file a joint return and did not live apart from their spouse for the entire year.2

Property tax. Relief on the local property tax bill is a largely municipal system. Clause 41 of Chapter 59, Section 5 is the statutory senior exemption, and it is not an age test alone: alongside age 70 it carries a residency-and-ownership test built from ten years' Massachusetts domicile, five years of owning and occupying the home or other Massachusetts real property, and a surviving-spouse route, and it requires gross receipts under six thousand dollars, seven thousand if married, with a whole estate of no more than seventeen thousand, twenty thousand if married.3 Those figures have never been indexed, which is why almost nobody qualifies under bare Clause 41 and why the municipal versions are the ones that matter: a city or town may instead accept Clause 41B, 41C or 41C and a half, and Clause 41C lets it vote the age down to 65 and raise the money limits.3 A town that accepts Section 5K may also run a senior tax work-off program.3 The state itself runs a refundable Senior Circuit Breaker income-tax credit for residents 65 or older by December 31 of the tax year who live in a Massachusetts home they own or rent as their principal residence, whose property tax, or 25 percent of their rent, exceeds 10 percent of their total Massachusetts income, and who fall within the credit's income and assessed-value limits.3 See our senior property tax relief guide for how Massachusetts relief works.

For families weighing how retirement income covers care, start with our guide on how to pay for senior care, our framework for building a senior care funding plan, and our overview of retirement accounts for care.

Next Steps

• Check the plan, not just the employer. A contributory government pension is exempt; a private pension, a TSP and a 457 are taxed at 5 percent.1
• If you have a reciprocal-state pension, confirm reciprocity with the Massachusetts Department of Revenue before assuming it's exempt.
• Track your IRA contribution basis so you don't overpay state tax on withdrawals.
• If you expect a large one-time gain, plan around the 4 percent surtax threshold with your preparer.
• Map income against care costs. Read our guide to paying for senior care and retirement accounts for care.

Learn More

Find personalized help planning retirement income 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.