- Definitions
- IRA Distributions for Charitable Purposes
- Pensions
- Rollovers
- Tables
- Nonresident Pension Distributions
- Documentation to Submit with Abatement/Amended Tax Return
- Massachusetts and Federal References
- Prior Law, History of Pensions
Contributions to a pension or retirement fund are amounts paid into funds by either employees or by their employers on their behalf. Contributions usually have limits based on participants' compensation. Individuals with IRAs also make contributions.
Distributions from a pension or retirement fund are amounts paid out of the fund to employees who have separated from their employment. Distributions usually have time limits based on age and definition of plan. Individuals with IRAs also receive distributions.
Previously taxed contributions, Massachusetts, are contributions for which a Massachusetts deduction was not allowed at the time an individual contributed to certain retirement savings accounts such as an IRA account.
Retirement Plan, Employee: Employers who want to provide retirement benefits for employees customarily establish a pension, profit-sharing or stock bonus plan that qualifies for preferential tax treatment. This includes:
- tax exemption for the fund established to provide benefits;
- deductions by the employer for contributions made to the fund;
- tax deferral for the employee for the employer's contributions and earnings; and
- in some instances, favorable tax treatment when benefits are paid.
Other State's Tax Treatment of Out-of-State Employee Contributory Government Pensions
Reporting of Income and Deductions:
- The income received must first be included in the employee's Massachusetts gross income as pension income on Form 1, Line 4.
- If the amount is deductible from Massachusetts gross income, it is then claimed as a deduction on Schedule Y, Line 13.
DOR is providing this information as a courtesy to Massachusetts resident taxpayers trying to determine the taxability of their out-of-state government pensions. This table has been compiled from non-DOR sources and DOR does not certify that the information is complete. The two (2) sources are:
- November, 2006 AARP Public Policy Institute - State Taxation of Social Security and Pensions in 2000 by David Baer; and
- 2007 National Association of Retired Federal Employees (NARFE).
This list has been updated to reflect 2012 amounts; it should be used for guideline purposes only when determining the amount of Out-of-State Employee Contributory Government Pension.
| State | Treatment of Out-of-State Government Pensions |
| Alabama | All out-of-state government pensions are tax-exempt if they are defined benefit plans |
| Alaska | No personal income tax |
| Arizona | All out-of-state government pensions are fully taxed |
| Arkansas | All out-of-state government pensions qualify for the $6,000 pension exemption: for tax year 2012 age 65 or older who do not qualify for the $6,000 exemption qualify for a $23 tax credit per taxpayer |
| California | All out-of-state government pensions are fully taxed |
| Colorado | All out-of-state government pensions qualify for the pension exemption: age 55 to 64 qualify for a $20,000 exemption; age 65 or older qualify for a $24,000 exemption |
| Connecticut | All out-of-state government pensions are fully taxed |
| Delaware | All out-of-state government pensions qualify for the pension exemption: under age 60 receive a $2,000 exemption; age 60 or older receive a $12,500 exemption |
| District of Columbia | All state government pensions are fully taxed |
| Florida | No personal income tax |
| Georgia | All out-of-state government pensions qualify for the pension exclusion: for tax year beginning on or after January 1, 2012, taxpayers age 65 or older or totally disabled receive the maximum exclusion of $65,000. For subsequent years, the exclusion amounts are:
The retirement exclusion for taxpayers who are age 62 to 64 remains at $35,000. |
| Hawaii | All out-of-state government pensions are tax-exempt |
| Idaho | All out-of-state government pensions are fully taxed |
| Illinois | All out-of-state government pensions are tax-exempt |
| Indiana | All out-of-state government pensions are fully taxed |
| Iowa | All out-of-state government pensions qualify for the pension exemption: age 55 or older or disabled receives an exemption. Starting in tax year 2001, the exemption increased to the $6,000 for single and head of household filers and $12,000 for married filing joint filers but not to exceed the amount included in Federal Adjusted Gross Income. |
| Kansas | All out-of-state government pensions are fully taxed |
| Kentucky | All out-of-state government pensions qualify for the pension exemption: the maximum exemption is $41,110. Employees who retired before January 1, 1998 receive a full exemption of their public pensions. Those retiring after January 1, 1998 receive an exemption based on the amount of the individual's service time prior to January 1, 1998, compared to their total service time. Starting in tax year 2005, the amount increased to $41,110 |
| Louisiana | All out-of-state government pensions qualify for the pension exemption: age 65 or older qualifies for an exemption of $6,000. Taxpayers that are married filing jointly and are both age 65 or older can each exclude up to $6,000. If only one spouse has retirement income, the exclusion is limited to $6,000. |
| Maine | All out-of-state government pensions qualify for the $6,000 pension exemption which is reduced by taxable and nontaxable Social Security and Railroad Retirement benefits |
| Maryland | All out-of-state government pensions qualify for the pension exemption, which is first reduced by taxable and nontaxable Social Security and Railroad Retirement benefits: age 65 or older and/or totally disabled to qualify for the exemption. For tax year 2012, the maximum exemption is $27,100. |
| Michigan | All out-of-state government pensions: Michigan has reciprocal agreements with other states including Massachusetts. That is, if another state does not tax out-of-state government pensions of former Michigan state or local government employees who are now citizens of the other state, then Michigan will not tax Michigan residents who receive public pensions from those other states. Otherwise, out-of-state government pensions qualify for the same exemptions as private pensions: for tax year 2012, the maximum exemption is $47,309 for single, head of household and married filing separate filers and $94,618 for married filing joint filers. |
| Minnesota | All out-of-state government pensions qualify for the income exemption: taxpayers age 65 or older or those who are permanently disabled qualify for an exemption from any income source. The exemption is:
|
| Mississippi | All out-of-state government pensions are tax-exempt |
| Missouri | All out-of-state government pensions qualify for the public employee pension exemption: effective for tax years beginning in 2012, taxpayer’s exemption is limited to $6,000 or 100% of the taxable public pension to the extent the amounts are included in their federal adjusted gross income, not to exceed the maximum social security benefit of $35,234. The deduction amount is allowed for married couples with Missouri adjusted gross income less than $100,000 and single individuals with Missouri adjusted gross income less than $85,000. |
| Montana | All out-of-state government pensions qualify for the pension exemption: for 2012 the exemption of $3,830 is reduced by $2 for every $1 that the federal AGI exceeds $31,920. The exemption is entirely phased out when income reaches $33,835 for single filers or $35,750 for married filing joint filers when both spouses have pension income. |
| Nebraska | All out-of-state government pensions are fully taxed |
| Nevada | No personal income tax |
| New Hampshire | No personal income tax |
| New Jersey | All out-of-state government pensions qualify for the pension exclusion for taxpayers age 62 or older or disabled. The maximum exemption is $10,000 for married filing separate filers, $15,000 for single and head of household filers, and $20,000 for married filing joint filers. Pension and other retirement income exclusions are eliminated for taxpayers with NJ gross income over $100,000; taxpayers may still be eligible for a special exclusion up to $6,000. Under NJ's 3-Year Rule, annuities are not taxed until total employee contributions to civil service retirement have been recovered. |
| New Mexico | All out-of-state government pensions qualify for the $8,000 income exemption: taxpayers age 65 or older whose income is $28,500 or less for single filers, $25,500 for married filing separate filers or $51,000 or less for married, filing joint filers, may exempt up to $8,000 from any income source. |
| New York | All out-of-state government pensions qualify for the pension exemption: age 59 1/2 or older qualify for a $20,000 exemption |
| North Carolina | All out-of-state government pensions qualify for the public pension exemption of $4,000 |
| North Dakota | All out-of-state government pensions are fully taxed |
| Ohio | All out-of-state government pensions: there is no exclusion, exemption or deduction for out-of-state government pensions; however, out-of-state government pensions can be applied toward a retirement income tax credit |
| Oklahoma | All out-of-state government pensions qualify for the pension exemption of $10,000, but not to exceed the amount included in Federal Adjusted Gross Income. |
| Oregon | All out-of-state government pensions: there is no exclusion, exemption or deduction for out-of-state government pensions; however, out-of-state government pensions can be applied toward a retirement income tax credit |
| Pennsylvania | All out-of-state government pensions are tax-exempt provided taxpayer is age 59 1/2 or older |
| Rhode Island | All out-of-state government pensions are fully taxed |
| South Carolina | All out-of-state government pensions qualify for the public employee pension exemption: under age 65 can deduct up to $3,000; age 65 or older can deduct up to $10,000 |
| South Dakota | No personal income tax |
| Tennessee | No personal income tax |
| Texas | No personal income tax |
| Utah | All out-of-state government pensions qualify for a retirement tax credit. Starting with the 2008 tax year, Utah taxpayers may be able to claim a retirement tax credit on their Utah Individual Income Tax Return. Previously, an income exclusion was allowed to taxpayers age 65 or over, and a deduction of retirement income received was allowed to taxpayers under the age of 65 |
| Vermont | All out-of-state government pensions are fully taxed |
| Virginia | All out-of-state government pensions qualify for the age deduction. Taxpayers aged 65 or older qualify for a $12,000 exemption from any income source; taxpayers aged 62-64 qualify for the $12,000 exemption subject to limitations based on federal AGI. The deduction is reduced by $1 for each $1 that the federal AGI exceeds $50,000 for single filers or $75,000 for married filing separate or joint filers |
| Washington | No personal income tax |
| West Virginia | All out-of-state government pensions qualify for the income exemption. Taxpayers who are age 65 or older or are permanently disabled qualify for up to an $8,000 exemption from any income source. |
| Wisconsin | All out-of-state government pensions are fully taxed |
| Wyoming | No personal income tax |
Retirement Plan Contributions and Distributions
Massachusetts Only:
| Retirement Plan | Contribution | Mass vs. Federal Wages at time of Contributions | Distribution |
| 401(a) Profit Sharing Retirement Savings Plan | Deferred/not taxable | No difference | Fully taxable |
| 401(k) Qualified Cash or Deferred Arrangement Plan - CODA | Deferred/not taxable | No difference | Fully taxable |
| 403(b) TSA and TIAA-CREF Retirement Plan | 1998 forward, both mandatory and voluntary are deferred/not taxable. Prior to 1998, only mandatory were deferred / not taxable | 1998 forward, no difference. Prior to 1998, Mass wage higher than federal | Taxable above Mass previously taxed contributions prior to 1998 |
| Bank Pension: Savings Bank, Credit Union, Co operative Bank Employee's Retirement Association | Deferred/not taxable | Mass wages may be lower than federal | Fully taxable |
| Education Savings Account, Coverdell - CESA | Taxable (no deduction) | No difference | Generally, not taxable if certain requirements are met |
| Federal Employee Contributory Pension | Taxable (retirement deduction up to $2,000) | No difference | Not taxable |
| Federal Employee Thrift Savings Plan | Deferred/not taxable | Fully taxable | |
| IRA, Roth | Taxable (no deduction) | No difference | Generally, not taxable if certain requirements are met |
| IRA, Traditional | Taxable (no deduction) | No difference because IRA/Keogh contribution is a U.S. adjustment, not a reduction in wages | Taxable above Mass previously taxed contributions |
| Massachusetts Gov't Employees 457 Deferred Compensation Plan | Deferred/not taxable | No difference | Fully taxable |
| Massachusetts Police or Fire Department Pension | Taxable (retirement deduction up to $2,000) | Mass wages are higher than federal | Not taxable |
| Massachusetts State and Local Employee Contributory Pension | Taxable (retirement deduction up to $2,000) | Mass wages are higher than federal after January 12, 1988 | Not taxable |
| MBTA Pension | Taxable (retirement deduction up to $2,000) | Mass wages are higher than federal | Not taxable |
| Military Non-Contributory Pension | N/A | No difference | Not taxable |
| Out-of-State Employee Contributory Pension | Taxable (no deduction) | N/A | Amount is included but some or all may be deducted depending on the other state's treatment of Mass pensions |
| Railroad Pension, Tier I and II | Taxable (retirement deduction up to $2,000) | No difference | Amount is included but some or all may be deducted depending on the other state's treatment of Mass pensions |
| Social Security/FICA | Taxable (deduction up to $2,000) | No difference | Not taxable regardless of amounts that may be subject to tax federally |
| SEP or SEP-IRA - Simplified Employee Pension | Deferred/not taxable beginning in 1988 | No difference since 1988 | Taxable above Mass previously taxed contributions prior to 1988 |
| SIMPLE Account - Savings Incentive Match Plan for Employees | Deferred/not taxable beginning in 1998. Not allowed for Self-employed on own behalf | no difference since 1998 | Taxable above Mass previously taxed contributions prior to 1998 |
| TSA and TIAA-CREF - 403(b) Retirement Plan | 1998 forward, both mandatory and voluntary are deferred/not taxable. Prior to 1998, only mandatory were deferred / not taxable | 1998 forward, no difference. Prior to 1998, Mass wage higher than federal | Taxable above Mass previously taxed contributions prior to 1998 |
| Veteran's Pension under G.L. s. 32, Sections 56-60 | N/A | N/A | At time of retirement, lump sum distribution is not taxable; subsequent to lump sum, amount is taxable |
* This change took effect under the U.S. Tax Reform Act of 1986. SEP and SEP-IRAs were no longer under I.R.C. Section 219 and therefore amounts could be deferred under the Code of 1988.
A retiring employee who transfers all or part of the assets from one qualified pension plan to another similar qualified pension plan within 60 days will not recognize any income from the transfer to the extent that no income is recognized for federal income tax purposes.
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") has made Internal Revenue Code (Code) provisions relating to rollovers, and Massachusetts adopts the current federal Code with respect to these rollovers for tax years beginning on or after January 1, 2002.
For tax years beginning on or after January 1, 2002, Massachusetts follows the current federal Code for the following allowable tax-free direct rollovers:
- traditional IRA rolled over to another traditional IRA;
- traditional IRA rolled over to a qualified employer retirement plan;
- qualified employer retirement plan rolled over to a traditional IRA;
- qualified employer retirement plan rolled over to another qualified employer retirement plan.
Qualified employer retirement plans include:
- Qualified employer retirement plan under 401(a);
- Annuity contract under 403(a);
- TSA and TIAA-CREF retirement plan under 403(b); and
- Governmental deferred compensation plan under 457, but not private sector 457 plan.
Note: For Keoghs under 401; CODA plans under 401(k); SEP plans under 408(k); and SIMPLE plans under 408(p) - Massachusetts follows current Code; if a rollover is tax-free for federal purposes, it is likewise tax-free for Massachusetts purposes.
Rollovers that do not qualify as tax free rollovers:
- traditional IRA rolled over to Roth IRA;
- qualified employer retirement plan rolled over to a Roth IRA;
- indirect rollover, unless specifically excluded from gross income under the 2005 Code.
Workplace Retirement Plan Contributions Including "Catch-up" Contributions
Massachusetts adopts the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") which has made the following Internal Revenue Code (Code) provisions relating to qualified plans and other tax-favored retirement plans:
- increases the federal income tax contribution limits for elective deferrals;
- provides catch-up contributions for those age 50 or older;
- increases portability between plans and accounts by expanding the rollover provisions; and
- makes several other changes related to retirement plans and accounts.
Pension Contributions and Catch-up Amounts - Effective Date for Retirement Plan Conformity:
Massachusetts retains the reference in Chapter 62 to the 2005 Code for most income tax provisions, but adopts the current Code for the treatment of qualified plans and certain other tax-favored retirement plans. Effective for tax years beginning on or after January 1, 2002, Massachusetts conforms to the following sections of the Code as amended and in effect for the taxable year ("current Code"): IRC §§ 62(a)(1),72, 274(m) and (n), 401 to 420 inclusive (but excluding §§ 402A and 408q), 457, 529, 530, 3401 and 3405.
Contribution and Distribution Exclusions from Gross Income:
All amounts of retirement plan contributions and distributions that are excluded from federal gross income are excluded from Massachusetts income for the qualified plans listed below. Massachusetts conforms to federal law for the Maximum Exclusion Amounts as well as in the treatment of elective deferrals, catch-up contributions, and qualified rollovers of plan proceeds for:
- § 401(k) plans - Qualified Cash or Deferred Arrangements (CODA);
- § 403(b) plans - Tax-Sheltered Annuity Plans (TSA) and Teacher's Insurance and Annuity Association and College Retirement Equities Funds (TIAA-CREF);
- § 457 plans - Massachusetts Government Employees Deferred Compensation Plans;
- § 408(k) plans - SEPs (Simplified Employee Pensions); and
- § 408(p) plans - SIMPLE IRAs (Savings Incentive Match Plans for Employees).
Amounts for exclusion:
| SIMPLE IRA Governed by IRC Section 408(p)- Maximum Exclusion Amounts, And Additional Exclusion Amounts Allowed for Age 50 Catch-up Contributions | ||
| Tax Year | Maximum Exclusion | Additional Exclusion for Catch-up |
| 2002 | $7,000 | $500 |
| 2003 | $8,000 | $1,000 |
| 2004 | $9,000 | $1,500 |
| 2005 | $10,000 | $2,000 |
| 2006 | $10,000 | $2,500 |
| 2007 and 2008 | $10,500 | $2,500 |
| 2009 - 2012 | $11,500 | $2,500 |
| 2013 | $12,000 | $2,500 |
| Sections 401(k), 403(b), 457 plan or 408(k) SEP - Maximum Exclusion Amounts (or other applicable amount determined by federal law), and Additional Exclusion Amounts Allowed for Age 50 Catch-up Contributions | ||
| Tax Year | Maximum Exclusion | Additional Exclusion for Catch-up |
| 2002 | $11,000 | $1,000 |
| 2003 | $12,000 | $2,000 |
| 2004 | $13,000 | $3,000 |
| 2005 | $14,000 | $4,000 |
| 2006 | $15,000 | $5,000 |
| 2007 and 2008 | $15,500 | $5,000 |
| 2009 - 2011 | $16,500 | $5,500 |
| 2012 | $17,000 | $5,500 |
| 2013 | $17,500 | $5,500 |
The maximum applicable dollar amount of excludable salary deferrals will increase in subsequent tax years in accordance with the tables provided in the Code and subsequent cost-of-living adjustments provided for therein. Also, the additional exclusion allowed for age 50 catch-up contributions will increase in subsequent tax years in accordance with the tables provided in the Code and subsequent cost-of-living adjustments provided for therein.
Employer Deductions:
Massachusetts adopts the current Code where employers taxed under Chapter 62 are allowed a deduction for employer contributions to qualified plans and other retirement plans. In calculating adjusted gross income, Massachusetts generally allows the deductions available under § 404 of the Code. However, the § 404 deduction for contributions on behalf of Code § 401(c)(1) employees (sole proprietors and partners) is specifically disallowed.
Nonresident Pension Distributions
Public Law 104-95 prevents any state from taxing income from certain pensions and deferred compensation plans paid to nonresidents of that state.
Nonresidents who Were Former Massachusetts Residents:
Pursuant to Public Law 104-95, Massachusetts now exempts from taxation distributions from certain previously taxable pension and deferred compensation income for nonresidents. Those pensions that were exempt under the nonresident regulation remain exempt.
Massachusetts will not tax pension income received after December 31, 1995 by nonresidents if the income is received from any of the following sources:
- a qualified trust under I.R.C. § 401(a) exempt from taxation under I.R.C. § 501(a);
- simplified I.R.C. § 408(k) plans;
- I.R.C. § 403(a) annuity plans;
- I.R.C. § 403(b) annuity contracts;
- I.R.C. § 7701(a)(37) individual retirement plans;
- eligible deferred compensation plans of state and local governments and tax exempt organizations as defined by I.R.C. § 457;
- I.R.C. § 414(d) government plans;
- a trust or trusts described in I.R.C. § 501(c)(18);
- any plan, program or arrangement described in I.R.C. § 3121(v)(2)(C) if payments are made at least annually and spread over the actuarial life expectancy of the beneficiaries, or if payments are spread over at least a ten year period. Such income is also protected from state taxation if the plans are trusts under I.R.C. § 401(a), but exceed limits laid down in I.R.C. §§ 401(k), 401(m), 402(g), 403(b), 408(k) or 415 or any other limitation on contributions or benefits which may apply in the Code;
- non-contributory government plans; and
- military pensions of nonresidents.
Documentation to Submit with Abatement/Amended Tax Return:
- Copy of U.S. Form 1099-R - Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts;
- Rollovers: Statement documenting rollover.
- Nonresident Pension Distributions: Verification of residency on the date of distribution
- M.G.L. Chapter 62, Section 1 as amended by St. 2002, c. 186, s. 1
- M.G.L. Chapter 62, Sections 2(d)(1), 2(d)(1)(D)
- 830 CMR 62B.2.1: Withholding of Taxes on Wages
- 830 CMR 62.5A.1(5)(e): Non-Resident Income Tax
- Public Law 104-95: State Taxation of Pension Income
- TIR 02-18: Tax Changes Contained in "An Act Enhancing State Revenues" and Related Acts
- TIR 93-3: Massachusetts Income Tax Withholding on Eligible Rollover Distributions from I.R.C. s. 401 Qualified Plans and s. 403(b) Annuities
- LR 84-44: Rollover from a Keogh Plan to an IRA
- LR 80-33: Rollover Between Qualified Pension Plans
- I.R.C. §§ 401(c)(1); 402(c); 404; 408(d)(3)(A)
- The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRAA)
- Tables for Increased Amounts in Subsequent Years found at §§ 402(g)(1); 408(p)(2)(E); 414(v)(2); 457(e)(15)