Does Massachusetts Tax Social Security?
Massachusetts is one of the few states that does not tax Social Security benefits. This means retirees receiving Social Security income can benefit from lower state tax burdens compared to residents in states that impose taxes on these benefits.
Understanding Social Security Tax Exemptions in Massachusetts
Social Security benefits are completely exempt from Massachusetts state income tax, regardless of the recipient’s total income level. This applies to:
Retirement benefits
Survivor benefits
While Massachusetts does not tax Social Security benefits, recipients should be aware that federal taxation may still apply. The IRS may tax a portion of benefits if total income—including Social Security, pensions, and other sources—exceeds a certain threshold.
How Does Massachusetts Compare to Other States?
Massachusetts follows the policy of not taxing retirement benefits such as Social Security, which aligns it with states like Florida, New York, and Pennsylvania. However, some states, such as Colorado and Vermont, tax Social Security income based on income levels or phase-out exemptions.
Other Retirement Income Taxation in Massachusetts
While Social Security is tax-free, other sources of retirement income may be subject to Massachusetts’ 5% state income tax:
401(k) and IRA Withdrawals – Traditional IRA and 401(k) withdrawals are taxed as ordinary income.
Pension Income – Private pensions and out-of-state public pensions are taxable, while Massachusetts public pensions are generally tax-exempt.
Capital Gains on Retirement Investments – Investment income from stocks, bonds, and real estate may be subject to Massachusetts capital gains tax.
Conclusion
Social Security benefits are fully exempt from Massachusetts state income tax, providing retirees with a financial advantage. However, other forms of retirement income may still be subject to taxation. Understanding these tax policies can help retirees plan for their financial future.
