Does Massachusetts Tax Social Security and Retirement Income?

Social Security is not taxed

Massachusetts builds its own gross income from federal gross income, and the statute then deducts Social Security benefits that were included federally under section 86 of the Internal Revenue Code. The portion of a benefit taxed on a federal Form 1040 therefore never reaches Form 1. There is no income ceiling or age test. (M.G.L. c. 62, s. 2 (Massachusetts gross income; Social Security, government pension and IRA deductions))

The exemption does not carry over to the senior circuit breaker credit. That credit’s income test adds Social Security back, so benefits that are invisible on the tax return still count toward the limit described below. (M.G.L. c. 62, s. 6(k) (senior circuit breaker credit))

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Private pensions are taxed; contributory government pensions and military pay are not

A pension from a private employer is ordinary Part B income, taxed at 5%. Massachusetts has no pension exclusion based on age or income; the Department of Revenue’s guidance for non-government plans excludes only contributions Massachusetts has already taxed. (Massachusetts Department of Revenue, Tax Treatment of Non-Government Pensions)

The statute deducts income from any contributory annuity, pension or retirement fund of the United States government, the Commonwealth or any Massachusetts political subdivision to which the employee contributed. That covers federal civil service annuities and state, teachers’ and municipal pensions. Military retired pay is deductible whether or not the retiree contributed, and so are survivor benefit payments under the military plan. (M.G.L. c. 62, s. 2 (Massachusetts gross income; Social Security, government pension and IRA deductions))

Pensions from another state’s public plan get reciprocal treatment. A Massachusetts resident can deduct income from another state’s contributory public employee plan to the extent that state would not tax a comparable Massachusetts pension, because it has no income tax or gives a specific pension exclusion, deduction or exemption. The income is reported on Form 1 line 4 and the deductible part is claimed on Schedule Y, line 13. (Massachusetts Department of Revenue, Tax Treatment of Government Pensions (out-of-state contributory government pensions))

IRA and 401(k) withdrawals are taxed at 5%, after any Massachusetts-taxed contributions come back

Distributions from 401(k) and other qualified employer plans are included in Massachusetts gross income to the extent they are taxable federally, and they are taxed at 5%. (M.G.L. c. 62, s. 2 (Massachusetts gross income; Social Security, government pension and IRA deductions))

Traditional IRAs follow a different rule. Massachusetts never allowed a deduction for IRA contributions, so they were taxed when made, and the statute lets withdrawals come out tax-free until the total already taxed by Massachusetts has been recovered. Unlike the federal pro-rata method, the previously taxed contributions come out first. The calculation is the worksheet for Schedule X, line 2. (Massachusetts Department of Revenue, Tax Treatment of Non-Government Pensions)

The recovery covers only contributions Massachusetts actually taxed. Pre-tax 401(k) money rolled into an IRA is generally fully taxable when withdrawn, and someone who moves in from another state gets no adjustment for contributions made before arriving. The example households on this page treat every withdrawal as fully taxable, which overstates the tax for anyone with unrecovered Massachusetts basis. (Massachusetts Department of Revenue, Tax Treatment of Non-Government Pensions)

A Roth conversion is taxable in Massachusetts in the year it is done: the amount included in federal gross income is included in Massachusetts gross income, except for previously taxed contributions. The converted amount also counts toward the 4% surtax threshold and the circuit breaker income limit. (Massachusetts Department of Revenue, Tax Treatment of Non-Government Pensions)

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest, dividends and long-term gains at 5%; short-term gains at 8.5%

Massachusetts sorts income into three parts. Part A is interest, dividends and short-term capital gains; Part C is gains on capital assets held more than one year; Part B is everything else, including pensions and IRA withdrawals. Interest, dividends and long-term gains are all taxed at the 5% Part B rate, so qualified dividends and long-term gains get no preferential rate. (M.G.L. c. 62, s. 4 (rates of tax and the 4% surtax))

Two kinds of gain are taxed more heavily. Gains on assets held for one year or less are taxed at 8.5%, a rate that took effect for tax years beginning on or after January 1, 2023. Long-term gains on collectibles are taxed at 12%, after a 50% deduction. The example households have neither. (Massachusetts Department of Revenue, Tax Rates)

Interest on U.S. Treasury obligations is deducted from Massachusetts gross income, and so is interest on Massachusetts state and local bonds. Interest on other states’ municipal bonds, which is tax-free federally, is added back and taxed at 5%. (M.G.L. c. 62, s. 2 (Massachusetts gross income; Social Security, government pension and IRA deductions))

The rate on Part B income is 5%, the floor written into the statute, and the same rate applies to interest, dividends and long-term gains. The table above adds the surtax to show the combined 9% rate over the threshold; short-term gains (8.5%) and collectibles gains (12%) sit outside it. (M.G.L. c. 62, s. 4 (rates of tax and the 4% surtax))

The 4% surtax applies to the part of taxable income above a threshold that is indexed each year: $1,107,750 for 2026. The threshold is the same for single and joint returns, and since tax year 2024 a couple who file a joint federal return must also file jointly in Massachusetts, so spouses cannot each claim a separate threshold. The surtax is worked out on Schedule 4% Surtax, and 2026’s threshold is up from $1,083,150 the year before. (Massachusetts Department of Revenue, 4% Surtax on Taxable Income)

There is no standard deduction. The personal exemption is $4,400 for a single filer and $8,800 for a couple filing jointly, the maximum the statute allows, and each person who has reached 65 by the end of the year adds $700. A couple both over 65 subtract $10,200. Medical and dental expenses are also allowed as an exemption in the amount deductible federally, but only for filers who itemize on the federal return. (M.G.L. c. 62, s. 3 (deductions and exemptions))

No tax is due when Massachusetts adjusted gross income is $8,000 or less for a single filer or $16,400 or less for a joint return with no dependents (No Tax Status). Up to 1.75 times those amounts, $14,000 and $28,700, the Limited Income Credit caps the tax at 10% of the income above the threshold. Neither is available to married people filing separately. (M.G.L. c. 62, s. 5 (no-tax thresholds and limited income relief))

Age-65 exemption: $700 for each taxpayer or spouse who is 65 or older at the end of the year, worth $35 of tax per person at the 5% rate. (M.G.L. c. 62, s. 3 (deductions and exemptions))

Senior circuit breaker credit: a refundable credit for residents 65 or older who own or rent their principal residence. For a homeowner it equals the property tax paid, plus half of water and sewer charges where those are not already in the tax bill, less 10% of total income. Renters use 25% of rent in place of property tax. The credit is claimed on Schedule CB and is paid as a refund when it exceeds the tax due. (M.G.L. c. 62, s. 6(k) (senior circuit breaker credit))

Circuit breaker limits are indexed each year and the 2026 amounts had not been published on the review date. For tax year 2025 the maximum credit is $2,820; total income cannot exceed $75,000 for a single filer, $94,000 for a head of household or $112,000 for a joint return; and the home’s assessed value cannot exceed $1,298,000. On a joint return only one spouse needs to be 65, and married couples must file jointly to claim it. (Massachusetts Department of Revenue, TIR 25-7: annual update of the real estate tax credit for persons 65 and older (tax year 2025))

Total income for the credit is wider than taxable income. It adds back Social Security, exempt government pensions, tax-exempt interest and other receipts left out of Massachusetts adjusted gross income, then subtracts the age-65, blindness and dependent exemptions. The single example household on this page has total income of $74,300 on that measure, just inside the 2025 limit, and would receive a credit only if property tax exceeded $7,430. The households’ homes are not specified, so the example figures include no credit. (M.G.L. c. 62, s. 6(k) (senior circuit breaker credit))

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from Massachusetts's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which does not change with the state. The tax bracket calculator and the guide to taxes in retirement cover that side.

For comparison with other states, the Tax Foundation’s 2026 report, using 2024 Census data, puts the Massachusetts effective property tax rate on owner-occupied homes at 1.00% of value, 16th highest in the country. On an $800,000 home that is about $8,000 a year, and rates differ widely from town to town. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figure))

Proposition 2½ limits what a city or town can raise in total, not what an individual owner pays. The total levy cannot exceed 2.5% of the full and fair cash value of all property in the municipality, and the levy limit cannot grow by more than 2.5% a year unless voters approve more. An individual bill can still rise faster. (M.G.L. c. 59, s. 21C (Proposition 2½ levy limits))

Local relief for older homeowners is granted by the board of assessors under clauses of M.G.L. c. 59, section 5, and most of it is aimed at households with modest income and assets. Which clause applies depends on what the city or town has adopted; the table gives the statutory amounts and the range a municipality may choose. (M.G.L. c. 59, s. 5 (property tax exemptions, clauses 41 to 41D))

The sales tax is 6.25% of the sales price of tangible goods. Clothing and footwear are exempt up to $175 per item, and only the amount over $175 is taxed: the Department of Revenue’s example is a $200 suit, on which the tax is $1.56. (Massachusetts Department of Revenue, Sales and Use Tax guide)

The exemptions in the statute cover much of a retired household’s routine spending. Food bought for home consumption is exempt, though restaurant meals are taxed. So are medicine sold on prescription, insulin, hearing aids, prescription eyeglasses, crutches and wheelchairs, and canes and home hospital beds prescribed by a physician. (M.G.L. c. 64H, s. 6 (sales tax exemptions))

For comparison, the Tax Foundation lists Massachusetts with a 6.25% state rate and a 0.00% average local rate as of January 1, 2026, a combined rate that ranks 35th among the states. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figure))

Massachusetts taxes estates above $2 million. For deaths on or after January 1, 2023, an estate owes nothing if its taxable value is $2,000,000 or less, and a larger estate subtracts a credit of up to $99,600 from the tax otherwise computed. The threshold is delivered through that credit, so it is a fixed dollar figure in the statute and is not indexed for inflation. (M.G.L. c. 65C, s. 2A (estate tax, $2 million threshold and $99,600 credit))

The tax is computed from the old federal credit for state death taxes, with marginal rates that run from 0.8% to 16%. The Department of Revenue’s table of state tax rates lists the estate tax and no inheritance tax, so heirs are not taxed separately on what they receive. (Massachusetts Department of Revenue, Tax Rates)

There is no portability. The law works from the Internal Revenue Code as it stood on December 31, 2000, before the federal rule that lets a surviving spouse inherit unused exemption existed, and it gives each estate its own credit of up to $99,600. If everything passes outright to a surviving spouse, the first spouse’s credit goes unused and the survivor’s estate has one credit, not two. (M.G.L. c. 65C, s. 2A (estate tax, $2 million threshold and $99,600 credit))

Massachusetts allows its own QTIP election, made on the Massachusetts return, irrevocable, and separate from any federal election. An executor can elect it for a trust that pays all income to the surviving spouse even where no federal election is made, so the Massachusetts marital deduction can be larger than the federal one. (M.G.L. c. 65C, s. 3A (Massachusetts QTIP election))

Real estate and tangible property located outside Massachusetts are removed from a resident’s estate before the tax is computed. In the other direction, someone who lives elsewhere but owns a Massachusetts house or other tangible property here is taxed on that property. (M.G.L. c. 65C, s. 2A (estate tax, $2 million threshold and $99,600 credit))

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

Chapter 50 of the Acts of 2023 still shapes a retiree’s return. It set the 8.5% rate on short-term gains from tax year 2023, while other Part A capital gains stay at 12%, and the same act rewrote the circuit breaker credit with a statutory base of $1,500 before indexing and created the $99,600 estate tax credit. (M.G.L. c. 62, s. 4 (rates of tax and the 4% surtax))

An initiative to cut the 5% rate to 4% did not reach voters in 2026. On June 18, 2026 the Supreme Judicial Court ordered judgment that Initiative Petition 25-18 could not appear on the 2026 ballot, so the 5% rate is unchanged. (Executive Office for Administration and Finance, letter to the Legislature on Initiative Petition 25-18 (June 30, 2026))

For deaths on or after August 1, 2025, the estate tax statute was amended so that property for which a Massachusetts QTIP deduction was taken in the first spouse’s estate is added to the survivor’s estate even when it is not part of the federal gross estate. (M.G.L. c. 65C, s. 2A (estate tax, $2 million threshold and $99,600 credit))

A resident is anyone domiciled in Massachusetts, and also anyone domiciled elsewhere who keeps a permanent place of abode in the state and spends more than 183 days of the year there. Any part of a day counts as a day. Residents are taxed on income from all sources. (M.G.L. c. 62, s. 1 (definition of resident))

The two tests work independently. In the Department of Revenue’s own examples, a couple domiciled in Massachusetts who spend most of the year in Florida remain residents, and a New Hampshire domiciliary with a Massachusetts apartment who spends 186 days in the state is taxed as a resident. (Massachusetts Department of Revenue, TIR 95-7: definition of “resident” for income tax purposes)

Someone who moves in or out during the year files Form 1-NR/PY as a part-year resident if gross income exceeds $8,000. Part-year residents report the income they received while they were residents, along with any Massachusetts-source income from the rest of the year. (Massachusetts Department of Revenue, Personal Income Tax Guide for Part-Year and Nonresidents)

After a move out, Massachusetts cannot tax a former resident’s retirement income. Federal law bars any state from taxing the retirement income of a person who is not a resident or domiciliary, which covers qualified plans, IRAs, government plans and military retired pay. (4 U.S.C. 114, limitation on state income taxation of certain pension income)