Amounts from the following pensions are exempt:
- Pension income received from a contributory annuity, pension, endowment, or retirement fund of the U.S. Government or the Commonwealth of Massachusetts and its political subdivisions.
- Pension income received from other states or its political subdivisions which do not tax such income from Massachusetts
or its political subdivisions may be eligible to be deducted from Massachusetts taxable income.
- Noncontributory pension income or survivorship benefits received from the U.S. uniformed services (Army, Navy, Marine Corps, Air Force, Coast Guard, commissioned corps of the Public Health Service, and National Oceanic and Atmospheric Administration).
- Pension income received by Massachusetts state court judges who were appointed on or after January 2, 1975. However, State court judges who were appointed prior to January 2, 1975 receive taxable noncontributory pensions, so their pension income isn't exempt.
If you retired under Chapter 32, Sections 56-60 of Massachusetts General Laws and you're a veteran who began Massachusetts state service before July 1, 1939, all or part of your pension income may be subject to tax. If you elected to receive your proceeds from contributions in one lump-sum distribution, original contributions to the retirement system are exempt. Noncontributory pension income received after a lump-sum distribution isn't exempt.
How do I report lump-sum distributions?
If you were an employee of the U.S., Massachusetts,
or one of its political subdivisions and left public employment
prior to retirement, your lump-sum distribution is exempt.
Lump-sum distributions of qualified employee benefit
plans in excess of the employee's contributions which were previously subject to Massachusetts tax (or not previously excluded from Massachusetts tax) must be reported as taxable, so don't include them as exempt. Generally, qualified rollovers are exempt in Massachusetts to the extent they're exempt on your U.S. return.
Rollover from a traditional IRA to a Roth IRA.
Taxpayers are allowed to make partial or complete rollovers from existing IRAs to Roth IRAs. Any taxable portion of these rollovers included in federal gross income is also included in Massachusetts
gross income, except for amounts previously subject to Massachusetts personal income tax.
