Retirement income on each return
| Income | Federal | Massachusetts |
|---|---|---|
| Social Security | Up to part taxable depending on income | Not taxed |
| Pension from Massachusetts or a Massachusetts city or town | Taxable | Excluded |
| Contributory federal pension or contributory pension from another state | Taxable | Excluded |
| Private-sector pension | Taxable | Taxable at 5% |
| Traditional IRA withdrawal | Taxable except any after-tax basis | Taxable only above contributions already taxed in Massachusetts |
| Qualified Roth IRA withdrawal | Excluded if age and holding-period rules are met | Excluded to the same extent |
| Senior deduction | $6,000 per person, 2025 to 2028, phased out above $75,000 MAGI ($150,000 joint) | Not allowed |
| Age 65 benefit | Extra standard deduction | $700 exemption per person |
Why IRA withdrawals differ
Federally, traditional IRA contributions were often deductible, so withdrawals are usually fully taxable. Massachusetts never allowed that deduction, so the contributions were taxed in Massachusetts when you made them. DOR says distributions are taxable in Massachusetts only to the extent they exceed contributions previously subject to tax.
In practice, that means a Massachusetts retiree who contributed to a traditional IRA while living here may have Massachusetts basis to recover. Records of contributions, including old Form 1s, are the evidence.
Illustrative example. A retiree contributed $60,000 to a traditional IRA over a career in Massachusetts, all deducted federally. Federally, withdrawals are fully taxable. In Massachusetts, the first $60,000 withdrawn, the contributions already taxed, is generally not taxed again; only amounts above that are.
Withholding and estimated tax
Wages stop at retirement, and with them automatic withholding. Pensions and IRA distributions can have tax withheld, but often not enough, and Social Security has no Massachusetts tax to withhold because it is not taxed there.
Massachusetts requires estimated payments when the tax not covered by withholding is expected to be more than $400. Federally, estimates are generally needed if you expect to owe $1,000 or more after withholding.
- Check federal and Massachusetts withholding on each pension
- Choose withholding on IRA distributions when you request them
- If withholding falls short, make estimated payments, with the last 2026 installment due January 15, 2027
Credits and exemptions for older Massachusetts filers
- $700 exemption for each taxpayer or spouse 65 or older by 31 December
- Senior circuit breaker credit for homeowners and renters, up to $2,820 for 2025, with a three-year window to claim missed years
- $440 child and family credit for a dependent 65 or older, if you support a parent
- Deduction of up to $2,000 per person for amounts paid into Social Security, Medicare or certain pensions, while still working
Moving away in retirement
Retirees who leave Massachusetts become part-year residents for the year of the move and file Form 1-NR/PY. Income received while a resident is taxable in Massachusetts; after the move, only Massachusetts-source income is. Keep clear evidence of the move date, and check with DOR's part-year guidance how each type of retirement income is sourced.
If you keep a home here and spend part of the year elsewhere, residency is a question of fact that DOR's residency guidance addresses, and it is worth settling before the first return after the move.
Records retirees should keep
- Form SSA-1099 for Social Security benefits
- Form 1099-R for each pension, annuity and IRA distribution
- Records of traditional IRA contributions made while a Massachusetts resident, including old Form 1s
- Property tax, water and sewer bills, or rent records, for the circuit breaker
- Records of any estimated tax payments, with dates
Where we come in
We prepare both returns for retirees, track Massachusetts IRA basis, and check the circuit breaker each year. If you have just retired, we can also help set withholding so the first year does not end with an underpayment penalty. Before we start, we give you a scope and a price in writing.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on 28 Sep 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
