Massachusetts - Taxable Pensions and Annuities

Per page 9 of the Massachusetts Form 1 Instructions:

Income from most private pensions or annuity plans is taxable in Massachusetts. Certain government pensions, however, are exempt under Massachusetts law. In general, exempt pensions include contributory pensions from the U.S. Government or the Commonwealth of Massachusetts and its political subdivisions, and noncontributory military pensions. The following section describes some specific pensions which are exempt. If your pension is exempt, enter 0 in line 4 and note the source on the dotted line to the left.

If your pension is not exempt, you should generally enter in line 4 the taxable amount reported on your U.S. Form 1040, line 4b. In some cases,however, Massachusetts law requires an adjustment to the federal amount. Distributions from annuity, stock bonus, pension, profit-sharing or deferred payment plans or contracts described in§§ 403(b) and 404 of the U.S. IRC must be adjusted to account for your contributions that have been previously taxed. Subtract from such income (as reported on your U.S. Form 1040, line 4a) the amount of your contributions which was previously taxed by Massachusetts until the total of your taxed contributions is received. If your pension falls into this category, enter the adjusted amount in line 4. If you are receiving distributions from an IRA or Keogh plan, do not report the income here; instead, see the instructions for Schedule X, line 2.

Note. Massachusetts does not tax Social Security income; therefore, you should not report such income on Massachusetts Form 1.

What pensions are exempt?

  • Pension income received from a contributory annuity, pension, endowment or retirement fund of the U.S. Government or the Commonwealth of Massachusetts and its political subdivisions.
  • Pensions from other states or its political subdivisions which do not tax such income from Massachusetts or its political subdivisions maybe eligible to be deducted from Massachusetts taxable income. This pension income, however,should be reported in line 4. Refer to Schedule Y, line 13 instructions to determine eligibility for this deduction.
  • Noncontributory pension income or survivorship benefits received from the U.S. uniformed services (Army, Navy, Marine Corps, Air Force, Coast Guard, commissioned corps of the Public Health Service and National Oceanic and Atmospheric Administration) are exempt from taxation in Massachusetts.
  • Massachusetts state court judges who were appointed on or after January 2, 1975 are participants in the Massachusetts contributory retirement system and their pensions are nontaxable.State court judges who were appointed prior to January 2, 1975 receive taxable noncontributory pensions.

If you retired under MGL ch 32, §§ 56–60 and area veteran who began Massachusetts state service prior to July 1, 1939, all or part of your pension income may be subject to tax. If you elected to receive your proceeds from contributions in one lump-sum distribution, your original contributions to the retirement system are not taxable. Noncontributory pension income received after a lump-sum distribution is fully taxable and should be reported in line 4.

To enter an exemption or adjustment to your retirement distribution on your Massachusetts tax return:

  1. From within your TaxAct return (Online or Desktop) click State. On smaller devices, click in the upper left-hand corner, then State.
  2. Click Massachusetts
  3. Click Income Topics to expand the category and then click Pension and Annuities