Definitions 

Pension contributions are amounts paid into funds by either employees or by their employers on their behalf. Individuals with IRAs also make contributions. 

Pension distributions are payments to employees from an employer-funded retirement plan for past services. 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 Account, Individual (IRA) is a retirement plan to which an individual may contribute a maximum amount annually. For joint filers, each may contribute up to the maximum amount allowable. Earnings accumulate tax-free on IRA contributions and depending on the type of IRA, distributions may or may not be taxable. Types of IRAs: Traditional and Roth.

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 of distributions.

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.

A Massachusetts resident may deduct income received from a contributory annuity, pension, endowment or retirement fund of another state or its political subdivisions if:

  • the other state has a specific income exclusion for pension income which applies to Massachusetts state or local contributory public employee pension plans; or
  • the other state has a specific deduction or exemption for pension income which applies to Massachusetts state or local contributory public employee pension plans; or
  • the other state has no income tax.

Note:  A Massachusetts resident may not deduct income received from a contributory annuity, pension, endowment or retirement fund of another state or its political subdivisions if the other state has a specific credit, e.g. Ohio, for pension income which applies to Massachusetts state or local contributory public employee pension plans.

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:

  • 2007 National Association of Retired Federal Employees (NARFE).
  • November, 2006 AARP Public Policy Institute - State Taxation of Social Security and Pensions in 2000 by David Baer.

This list has been updated to reflect 2013 amounts; it should be used for guideline purposes only when determining the amount of Out-of-State Employee Contributory Government Pension. 

StateTreatment of Out-of-State Government Pensions
AlabamaAll out-of-state government pensions are tax-exempt if they are defined benefit plans
AlaskaNo personal income tax
ArizonaAll out-of-state government pensions are fully taxed
ArkansasAll 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
CaliforniaAll out-of-state government pensions are fully taxed
ColoradoAll 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
ConnecticutAll out-of-state government pensions are fully taxed
DelawareAll 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 ColumbiaAll state government pensions are fully taxed
FloridaNo 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, the maximum retirement exclusion for taxpayers age 65 or older is$65,000.

The retirement exclusion for taxpayers who are age 62 to 64, or less than 62 and permanently disabled, remains at $35,000. 

Note: The Georgia DOR had planned to increase the retirement income exclusion each year until 2016 (for those 65 and older), at which time all retirement income was supposed to be excludable from taxable income. However the legislative bill has since been revised to cap the amount at the 2012 amount of $65,000 for the foreseeable future.

HawaiiAll out-of-state government pensions are tax-exempt
IdahoAll out-of-state government pensions are fully taxed
IllinoisAll out-of-state government pensions are tax-exempt
IndianaAll out-of-state government pensions are fully taxed
IowaAll 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.
KansasAll out-of-state government pensions are fully taxed
KentuckyAll 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
LouisianaAll 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.
MaineAll out-of-state government pensions qualify for the $6,000 pension exemption which must be reduced by taxable and nontaxable Social Security and Railroad Retirement benefits. Beginning in 2014, a new law will raise the income tax subtraction modification from $6,000 to $10,000. The subtraction modification is expanded to include all federally taxable pension income, annuity and individual retirement account distributions, except pick-up contributions for which a deduction has been allowed.
MarylandAll 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 2013, the maximum exemption is $27,800.
Michigan

Effective for tax years beginning in 2013, taxpayers who reach the age of 67 during 2013 may deduct $20,000 for single or married, filing separately, or $40,000 for joint filers against all income. If taxpayers qualify for the Michigan Standard Deduction, they are not eligible to deduct pension and retirement benefits.

The retirement/pension deduction or Michigan Standard Deduction are computed as follows:

  • Taxpayers born before 1946 subtract all qualifying pension and retirement benefits received from public sources.
  • Taxpayers born between 1946 and 1952 may deduct up to $20,000 in qualifying pension and retirement benefits if single or married filing separate or $40,000 for joint filers if married filing a joint return. Note: once these taxpayers turn 67 years old, the deduction for pension/retirement benefits is replaced by a standard deduction against all income of $20,000 for single filers or $40,000 for joint filers. 
  • Taxpayers born after 1952 are not entitled to a pension subtractions; all pension and retirement benefits are taxable. Note: once these taxpayers turn 67 years old, the deduction for pension/retirement benefits is replaced by a standard deduction against all income of $20,000 for single filers or $40,000 for joint filers.

Note: Qualifying pension and retirement benefits include most payments that are reported on a 1099-R for federal tax purposes. This includes defined benefit pensions, IRA distributions, and most payments from defined contribution plans. Qualifying public benefits include distributions from the following sources:
• The State of Michigan
• Michigan local governmental units (e.g., Michigan counties, cities, and school districts)
• Federal civil service

MinnesotaPensions, including federal pensions, are taxable by Minnesota.
Taxpayers 65 and older may subtract some income if their federal adjusted gross income is under certain limits.
MississippiAll out-of-state government pensions are tax-exempt
Missouri

All out-of-state government pensions qualify for the public employee pension exemption: For 2012 and forward, married couples with Missouri adjusted gross income (excluding taxable social security benefits) less than $100,000 and single individuals with Missouri adjusted gross income less than $85,000 may deduct 100 percent of their public retirement benefits, to the extent the amounts are included in their federal adjusted gross income.

Married couples with Missouri adjusted gross income greater than $100,000 and single individuals with Missouri adjusted gross income greater than $85,000 may qualify for a partial exemption which is limited to $6,000 or 100% of their taxable public pension, not to exceed their maximum social security benefits of $35,939.

Montana

All out-of-state government pensions qualify for the pension exemption: The retirement exemption is limited to the lesser of taxable retirement income received or $3,900, as long as federal adjusted gross income is $32,480 or less and filing status is either single, married filing jointly if only one spouse has taxable retirement income, or head of household. If filing jointly with spouse, both with retirement income and federal adjusted gross income is $32,480 or less, both spouses can exclude the lesser of taxable retirement income which was received personally, or $3,900 each for a maximum of $7,800.

When federal adjusted gross income exceeds $32,480, the retirement exemption is reduced $2 for every $1 that federal adjusted gross income is over $32,480. Taxpayer is not entitled to this retirement income exemption if federal adjusted gross income is greater than $34,430 if filing single, married filing separately, or head of household. If married and filing jointly and both spouses have retirement income, then retirement exemption is completely phased out when federal adjusted gross income is greater than $36,380.

NebraskaAll out-of-state government pensions are fully taxed
NevadaNo personal income tax
New HampshireNo personal income tax
New Jersey

All out-of-state government pensions qualify for the pension exclusion: Residents 62 or older may exclude all or part of their taxable pensions, annuities and IRA withdrawals if their gross income for the entire year before subtracting any pension exclusion does not exceed $100,000. The maximum amount excluded depends on filing status. If married and filing a joint return, the maximum exclusion is $20,000.  For single, head of household or qualifying widow or widower, the maximum exclusion is up to $15,000; and for married filing a separate return, the maximum exclusion is $10,000.

Taxpayers whose gross income does exceed $100,000 may still be eligible for a special exclusion up to $6,000.

New MexicoAll 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 YorkAll out-of-state government pensions qualify for the pension exemption: age 59 1/2 or older qualify for a $20,000 exemption
North CarolinaAll out-of-state government pensions qualify for the public pension exemption of $4,000. Note: This exemption has been eliminated starting in 2014.
North DakotaAll out-of-state government pensions are fully taxed
OhioAll 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 which is worth $25 to $200, depending on the amount of qualifying retirement income. In addition, seniors 65 and older can qualify for the senior citizen credit, worth $50 per tax return.
OklahomaFor tax years beginning in 2010, out-of-state government pensions qualify for the pension exemption of $10,000, and are no longer subject to the modified Oklahoma Adjusted Gross Income limit.
OregonAll 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 which is the lesser of tax liability or 9% of taxable pension income.
PennsylvaniaAll out-of-state government pensions are tax-exempt provided taxpayer is age 59 1/2 or older
Rhode IslandAll out-of-state government pensions are fully taxed
South CarolinaAll 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 DakotaNo personal income tax
TennesseeNo personal income tax
TexasNo personal income tax
UtahStarting with the 2008 tax year, all out-of-state government pensions qualify for a retirement tax credit of up to $450 per person ($900 per married couple), subject to income-eligibility limits. Taxpayers younger than 65 can claim a retirement tax credit of up to 6% of eligible retirement income or $288, whichever is less.
VermontAll out-of-state government pensions are fully taxed
VirginiaAll out-of-state government pensions qualify for the Virginia Age Deduction. For seniors born on January 1, 1939, or before, the age deduction is $12,000 per filer. For those born on January 2, 1939, or later, the $12,000 deduction for individual taxpayers 65 and older is reduced by $1 for every $1 that adjusted federal AGI exceeds $50,000, or $75,000 for married filers.
WashingtonNo personal income tax
West VirginiaAll out-of-state government pensions qualify for the income exemption. Taxpayers 65 and older may exclude the first $8,000 of any type of retirement income ($16,000 for married couples) from West Virginia taxes. Out-of-state pensions qualify for the $8,000/$16,000 exemption, too. Residents can exempt $2,000 of civil or state pensions.
WisconsinAll out-of-state government pensions are fully taxed
WyomingNo personal income tax

Retirement Plan Contributions and Distributions 

Columns below:

  • 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.
  • Mass vs. Federal Wages at time of Contribution
  • 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.

Income earned on contributions while in an employee or individual pension or retirement fund is excluded from gross income;.

Massachusetts Only:

Retirement PlanContribution to Retirement PlanMass vs. Federal Wages at time of ContributionsDistribution (Income) from Retirement Plan
401(a) Profit Sharing Retirement Savings Plan Contribution is deferred/not taxableNo differenceIncome is fully taxable
401(k) Qualified Cash or Deferred Arrangement Plan - CODA Contribution is deferred/not taxableNo differenceIncome is fully taxable
403(b) TSA and TIAA-CREF Retirement Plan1998 forward, both mandatory and voluntary contributions are deferred/not taxable. Prior to 1998, only mandatory were deferred / not taxable1998 forward, no difference. Prior to 1998, Mass wage higher than federalIncome is taxable above Mass. previously taxed contributions prior to 1998
Bank Pension: Savings Bank, Credit Union, Co operative Bank Employee's Retirement AssociationContribution is deferred/not taxableMass wages may be lower than federalIncome is fully taxable
Education Savings Account, Coverdell - CESA Contribution is taxable (no deduction)No differenceGenerally, income is not taxable if certain requirements are met
Federal Employee Contributory Pension PlanContribution is taxable (retirement deduction up to $2,000)No differenceIncome is not taxable
Federal Employee Thrift Savings Plan Contribution is deferred/not taxable Income is taxable
IRA, Roth Contribution is taxable (no deduction)No differenceGenerally, income is not taxable if certain requirements are met
IRA, Traditional Contribution is taxable (no deduction)No difference because IRA/Keogh contribution is a U.S. adjustment, not a reduction in wagesIncome is taxable above Mass previously taxed contributions
Massachusetts Gov't Employees 457 Deferred Compensation PlanContribution is deferred/not taxableNo differenceIncome is fully taxable
Massachusetts Police or Fire Department Pension PlanContribution is taxable (retirement deduction up to $2,000)Mass wages are higher than federalIncome is not taxable
Massachusetts State and Local Employee Contributory Pension PlanContribution is taxable (retirement deduction up to $2,000)Mass wages are higher than federal after January 12, 1988Income is not taxable
MBTA Pension PlanContribution is taxable (retirement deduction up to $2,000)Mass wages are higher than federalIncome is not taxable
Out-of-State Employee Contributory Pension PlanContribution is taxable (no deduction)N/AIncome 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 Contribution is taxable (retirement deduction up to $2,000)No differenceIncome is included but some or all may be deducted depending on the other state's treatment of Mass pensions
Social Security/FICAContribution is taxable (deduction up to $2,000)No differenceIncome is not taxable regardless of amounts that may be subject to tax federally
SEP or SEP-IRA - Simplified Employee Pension PlanContribution is deferred/not taxable beginning in 1988No difference since 1988Income is taxable above Mass previously taxed contributions prior to 1988
SIMPLE Account - Savings Incentive Match Plan for Employees Contribution is deferred/not taxable beginning in 1998. Not allowed for Self-employed on own behalfNo difference since 1998Income is taxable above Mass previously taxed contributions prior to 1998
TSA and TIAA-CREF - 403(b) Retirement Plan1998 forward, both mandatory and voluntary contributions are deferred/not taxable. Prior to 1998, only mandatory were deferred / not taxable1998 forward, no difference. Prior to 1998, Mass wage higher than federalIncome is taxable above Mass previously taxed contributions prior to 1998
U.S. Military Non-Contributory Pension Plan N/ANo differenceIncome is not taxable
Veteran's Pension Plan under G.L. s. 32, Sections 56-60 N/AN/AAt 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. 


Rollovers

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 YearMaximum ExclusionAdditional 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 YearMaximum ExclusionAdditional 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

Massachusetts References:


Federal References:

  • 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)