Yes — Massachusetts does tax IRA distributions, but with a twist that often works in your favor. The taxable portion of a Traditional IRA withdrawal is taxed at the state’s flat 5% income tax rate, while qualified Roth IRA distributions are entirely state-tax-free. The twist is that Massachusetts never let you deduct your Traditional IRA contributions in the first place, so those contributions come back out tax-free before any of your withdrawals become taxable at the state level.1Massachusetts Department of Revenue. View Tax Treatment of Retirement Plan Contributions and Distributions
The Rate You’ll Actually Pay
Massachusetts applies a flat 5% income tax rate to the taxable portion of a Traditional IRA distribution.2Mass.gov. Massachusetts Tax Rates A separate 4% surtax applies to taxable income above an inflation-adjusted threshold. For tax year 2025 that threshold is $1,083,150.3Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income A large withdrawal that pushes you over that line is taxed at a combined 9% on the excess.
IRA distributions don’t qualify for any special exemption. Once your basis is recovered, they’re taxed like wages.
Why Your First Withdrawals May Be State-Tax-Free
This is where Massachusetts departs sharply from the IRS. Federally, Traditional IRA contributions are usually deductible, so almost every dollar coming out is taxable. Massachusetts never allowed that deduction, which means every dollar you contributed was already taxed by the state. That previously taxed amount is your Massachusetts basis, and the state lets you recover all of it before taxing any further distributions.1Massachusetts Department of Revenue. View Tax Treatment of Retirement Plan Contributions and Distributions
The federal rule is pro-rata: each distribution is split between taxable earnings and nontaxable basis, so some tax is due on every withdrawal. Massachusetts uses a contributions-first rule instead. Every dollar you pull out is treated as a return of basis until that basis is fully recovered. Only then do additional distributions become taxable.
The effect can be large. If you contributed $80,000 to a Traditional IRA over your career and the account grew to $300,000, the first $80,000 in Massachusetts distributions is completely free of state income tax. The remaining $220,000 is fully taxable at 5% (or 9% above the surtax threshold). The IRS, meanwhile, taxes a portion of every single withdrawal along the way.
One catch trips up people who moved to Massachusetts mid-career: the state only credits you for contributions actually taxed by Massachusetts. Contributions made while you were a resident of another state generated no Massachusetts tax and create no Massachusetts basis.
Roth IRA Distributions
Massachusetts generally follows federal law for Roth IRAs.4Mass.gov. Personal Income Tax for Residents A qualified distribution is entirely tax-free at both the federal and state level. To qualify, you must have held the Roth for at least five tax years from your first contribution, and the distribution must occur under one of these circumstances:5Mass.gov. Tax Treatment of Non-Government Pensions in Massachusetts
- You are age 59½ or older.
- You are totally and permanently disabled.
- The distribution goes to your beneficiary or estate after your death.
- You use up to $10,000 for a first-time home purchase.
If a distribution doesn’t meet both conditions, only the earnings portion is taxable. Massachusetts applies the federal ordering rules: withdrawals come first from your regular contributions (always tax-free), then from conversion amounts, and finally from earnings. Many non-qualified Roth distributions still end up state-tax-free because the account owner hasn’t yet withdrawn more than their total contributions.
Roth Conversions
Converting a Traditional IRA to a Roth is a taxable event in Massachusetts, as it is federally. The converted amount is included in your Massachusetts gross income for the year of conversion, minus any Massachusetts basis you haven’t yet recovered.5Mass.gov. Tax Treatment of Non-Government Pensions in Massachusetts If you still have unrecovered basis in the Traditional IRA, that portion of the conversion escapes state tax too.
Early Withdrawals
Taking money out before age 59½ doesn’t change the Massachusetts calculation. The distribution is still taxed at 5% on any amount above your remaining basis, and the state does not add its own early withdrawal penalty.6University of Massachusetts. Does Massachusetts Tax IRA Distributions? The federal government, however, generally adds a 10% penalty on the taxable portion unless you qualify for an exception.
Inherited IRAs
When you inherit a Traditional IRA, distributions are taxable in Massachusetts the same way they would have been for the original owner, reduced by any remaining Massachusetts basis the decedent had not yet recovered. Federal law now requires most non-spouse beneficiaries to empty an inherited IRA within 10 years of the owner’s death for deaths after December 31, 2019.7Internal Revenue Service. Retirement Topics – Beneficiary A surviving spouse, a minor child, a disabled or chronically ill beneficiary, or someone no more than 10 years younger than the deceased owner can stretch distributions over their own life expectancy instead.
Inherited Roth IRAs are subject to the same distribution timeline, but qualified distributions remain tax-free at both the federal and state level.
Nonresidents and People Leaving Massachusetts
Residency determines whether Massachusetts can tax your IRA distributions at all. You’re a full-year resident if you’re domiciled in Massachusetts, or if you keep a permanent place of abode in the state and spend more than 183 days there during the tax year.8Mass.gov. Legal and Residency Status in Massachusetts Full-year residents owe Massachusetts tax on all income, IRA distributions included.
Nonresidents get a very different result. Massachusetts only taxes nonresidents on income from a trade or business in the state, employment performed in the state, or real or tangible property located in the state.9Cornell Law School. 830 CMR 62.5A.3 – Massachusetts Source Income of Nonresidents IRA distributions are intangible income and not Massachusetts-source income. A nonresident owes zero Massachusetts tax on IRA distributions, even if the account was funded entirely while living in Massachusetts.10Mass.gov. Tax Treatment of Pensions in Massachusetts Federal law backs this up: under 4 U.S.C. § 114, no state may tax the retirement income of a non-resident, and IRA distributions fall within the protected categories.11Office of the Law Revision Counsel. 4 U.S. Code 114 – Limitation on State Income Taxation of Certain Pension Income
Nonresidents also aren’t taxed on Roth conversion distributions, which opens a planning window for someone leaving Massachusetts: a conversion completed after you’ve established residency in a no-income-tax state won’t generate Massachusetts tax.
Part-year residents owe Massachusetts tax on IRA distributions received during the portion of the year they were a resident, but not on distributions received after they established residency elsewhere. If you’re planning a move, the timing of a large withdrawal or conversion relative to your change-of-residency date matters.
Other Retiree Breaks That Offset IRA Tax
IRA distributions themselves get no special treatment, but several nearby items reduce your overall Massachusetts tax picture. Social Security benefits are fully excluded from Massachusetts gross income regardless of how much you earn.12Mass.gov. Massachusetts Tax Information for Seniors and Retirees Pensions from the Massachusetts state and local government contributory retirement system are also fully exempt,13Massachusetts Department of Revenue. Tax Treatment of Government Pensions in Massachusetts and U.S. military retired pay is excluded from Massachusetts gross income for residents and nonresidents alike.14Massachusetts Department of Revenue. MA Tax Information for Military Personnel and Their Spouses Private pensions and IRA distributions don’t share any of these exclusions.
Massachusetts offers personal exemptions that reduce taxable income: $4,400 for single filers, $6,800 for head of household, and $8,800 for married couples filing jointly. Taxpayers 65 or older by December 31 get an additional $700 exemption, with each spouse qualifying separately on a joint return.15Mass.gov. Massachusetts Personal Income Tax Exemptions
The Senior Circuit Breaker credit is worth checking. If you’re 65 or older and own or rent your principal residence in Massachusetts, you may qualify for a refundable credit based on the property taxes or rent you paid. The maximum credit for tax year 2025 is $2,820.16Massachusetts Department of Revenue. Massachusetts Senior Circuit Breaker Tax Credit Because it’s refundable, it can offset state tax on IRA distributions or produce a refund outright.
What You File and the Basis You Have to Track
To figure out how much of a distribution is actually taxable in Massachusetts, you complete the Schedule X, Line 2 Worksheet that accompanies Form 1 for residents or Form 1-NR/PY for part-year residents.5Mass.gov. Tax Treatment of Non-Government Pensions in Massachusetts Your cumulative Massachusetts basis has to be tracked from year to year in your own records. The 1099-R from your IRA custodian reports total distributions and the federal taxable amount, but not Massachusetts basis. Losing those records can cost you the tax-free treatment the state would otherwise give you.
Massachusetts withholding is required on IRA distributions whenever federal withholding is taken, and you can’t waive the state withholding independently. For eligible rollover distributions, the state withholding rate is 5%.