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Tool | August 2013

State-by-State Guide to Taxes on Retirees

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The Bottom Line
Map of Massachusetts


The Bay State offers a couple of breaks to retirees. Massachusetts does not tax Social Security and most government-employee pension income. But all other income is taxed at a flat rate of 5.25%. Property taxes run high, though there is a refundable tax credit available to eligible homeowners 65 or older. Massachusetts also has its own estate tax.

State Sales Tax

6.25%. Food, prescription drugs, fuel costs (gas, oil and electricity) and items of clothing priced up to $175 are exempt. Cities and towns are authorized to impose an additional 0.75% tax on sales of meals.

Income Tax Range

Massachusetts has a flat rate of 5.25% of federal adjusted gross income.

Social Security

Social Security benefits are not taxed.

Exemptions for Other Retirement Income

Civil-service and Massachusetts state and local government pensions are exempt. Also exempt: pension income from other state or local governments that do not tax Massachusetts public pensions.

Property Taxes

Property is taxed at the local level. Median property tax on the state's median home value of $338,500 is $3,511, according to the Tax Foundation.

Massachusetts does not have a general homestead exemption but does have a Homestead Act, which permits a homeowner who occupies a house as his or her principal residence to shield up to $500,000 in equity in that house from creditors.

Tax breaks for seniors: Massachusetts allows certain residents who are 65 or older to claim a refundable tax credit on their state income taxes to offset real estate taxes paid during the year on their principal home. The taxpayer's total income cannot exceed $53,000 for a single filer, $67,000 for a head of household or $80,000 for taxpayers filing jointly. The value of the homeowner's personal residence cannot exceed $705,000.

Inheritance and
Estate Taxes

Massachusetts has no inheritance tax. Estates valued at more than $1 million may be subject to an estate tax. Tax rates range from 0.8% for estates valued at $1 million to 16% for estates exceeding $10,040,000. There is an unlimited marital deduction for property left to a surviving spouse and an unlimited charitable deduction for property left to a qualified charity.

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