|Referenced Sources:||Massachusetts General Laws|
Personal Income Tax
You ask whether military retirement benefits are taxable to Massachusetts residents.
Income from certain retirement funds is exempt form Massachusetts taxation., G.L. c. 62, § 2(a)2(E) specifically provides that Massachusetts gross income is federal gross income minus "income form any contributory.... retirement fund of the United States government...to which the employee has contributed." the funding form the military retirement system comes entirely form the employer, the United States. We conclude that because military personnel do not actually contribute to their retirement system, military retirement pay is not exempt under G.L. c. 62 § 2(a)2(e).
As you know, the federal government, 27 other states and the District of Columbia also treat military retirement pay as taxable. We have examined the Massachusetts stature carefully to see whether and exception can be made for military pensions. However, the statute as it is currently written exempts only income form contributory retirement funds of the United States government, and the military retirement system is clearly not contributory. We are constrained to interpret and administer the law as it is written.
As the statute does not accommodate the interpretation you advocate and the relief you seek here, the only way to change the current tax treatment of military pensions is to change the law itself. We understand that a bill is pending in the Legislature now, as in previous years,to amend the law on behalf of those military retirees who are at least 60 years of age. As this bull moves through the General court, we will certainly provide you with any technical assistance you need.