Yes, Massachusetts does tax IRA distributions, but only the portion that exceeds what you already paid state tax on. The state applies its flat 5% income tax rate to Traditional IRA withdrawals, with one important twist: because Massachusetts never allowed a deduction for Traditional IRA contributions, every dollar you put in was already taxed. The state lets you pull those contributions back out tax-free before any of your withdrawal becomes taxable.1Massachusetts Department of Revenue. View Tax Treatment of Retirement Plan Contributions and Distributions
The 5% Rate and the Surtax
The Massachusetts income tax rate is a flat 5%, and it applies to the taxable portion of your IRA distribution the same way it applies to wages.2Mass.gov. Massachusetts Tax Rates A separate 4% surtax attaches to taxable income above an annually adjusted threshold. For tax year 2025 that threshold is $1,083,150.3Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income A very large withdrawal that pushes you past that line will be taxed at a combined 9% on the excess.
Why Your First Withdrawals May Be State-Tax-Free
This is where Massachusetts diverges most sharply from federal treatment. The IRS uses a pro-rata rule that splits each distribution proportionally between taxable earnings and nontaxable basis, so a federal tax bill starts with the very first dollar. Massachusetts uses a contributions-first rule instead. Every dollar you withdraw is treated as a return of your previously taxed contributions until your full Massachusetts basis is recovered. Only after that point do subsequent distributions become taxable at 5%.1Massachusetts Department of Revenue. View Tax Treatment of Retirement Plan Contributions and Distributions
The practical effect can be dramatic. If you contributed $80,000 to a Traditional IRA over your career and the account grew to $300,000, your first $80,000 in Massachusetts distributions come out state-tax-free. The remaining $220,000 is fully taxable at 5%. Federally, a portion of every withdrawal along the way would be taxed.
A caveat: Massachusetts only credits you with basis for contributions actually taxed by Massachusetts. If you moved to the state mid-career, contributions made while living somewhere else, say New Hampshire, generated no Massachusetts tax and therefore create no Massachusetts basis. Tracking your basis year to year is your responsibility. Your Form 1099-R reports the federal taxable amount, not the state-specific one, so keeping your own running total of contributions and prior recoveries matters. You’ll use the Schedule X, Line 2 Worksheet with your Form 1 return each year to calculate the Massachusetts taxable amount.4Mass.gov. Tax Treatment of Non-Government Pensions in Massachusetts
Roth IRA Distributions
Massachusetts follows federal law for Roth IRAs.5Mass.gov. Personal Income Tax for Residents A qualified Roth distribution is 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 fall into one of these categories:4Mass.gov. Tax Treatment of Non-Government Pensions in Massachusetts
- Age 59½ or older, the most common qualifying event for retirees.
- Total and permanent disability.
- Distributions to a beneficiary or estate after your death.
- A first-time home purchase, up to $10,000.
If a distribution doesn’t meet both conditions, only the earnings portion is taxable. Massachusetts applies the federal ordering rules: withdrawals come out first from your regular contributions (always tax-free), then from conversion amounts, and finally from earnings. Because most people withdraw less than their total lifetime contributions, many non-qualified Roth distributions still end up state-tax-free.
Roth Conversions
Converting a Traditional IRA to a Roth is a taxable event in Massachusetts, just as it is federally. The converted amount goes into your Massachusetts gross income for the year of conversion, minus any Massachusetts previously taxed contributions you haven’t yet recovered.4Mass.gov. Tax Treatment of Non-Government Pensions in Massachusetts So the contributions-first rule helps here too. Unrecovered basis in your Traditional IRA reduces the taxable portion of the conversion. Residents and part-year residents report the conversion on the Schedule X worksheet; nonresidents owe no Massachusetts tax on a conversion at all.
Required Minimum Distributions and Early Withdrawals
Federal law requires you to start Traditional IRA withdrawals by April 1 of the year after you turn 73, and Massachusetts follows that same timeline.6Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Each RMD is treated like any other Traditional IRA distribution for state purposes: taxable at 5% once your Massachusetts basis is recovered. Roth IRAs have no RMD requirement during the original owner’s lifetime, which makes them useful for retirees who don’t need the income and want to keep taxable withdrawals low.
Taking money out before age 59½ doesn’t change the Massachusetts calculation. The distribution is still subject to the 5% state tax on any amount above your remaining basis, and the state imposes no separate early withdrawal penalty.7University of Massachusetts. Does Massachusetts Tax IRA Distributions? The federal government’s 10% early withdrawal penalty is a separate matter and can apply on top of the Massachusetts tax.
Inherited IRAs
When you inherit a Traditional IRA, distributions are generally taxable in Massachusetts the same way they would be for the original owner, reduced by any remaining Massachusetts basis the decedent had not yet recovered. For deaths after December 31, 2019, federal law requires most non-spouse beneficiaries to empty an inherited IRA within 10 years, and Massachusetts follows this rule.8Internal Revenue Service. Retirement Topics – Beneficiary Surviving spouses, minor children, disabled or chronically ill beneficiaries, and beneficiaries no more than 10 years younger than the deceased owner qualify as eligible designated beneficiaries and can stretch distributions over their own life expectancy. Inherited Roth distributions remain tax-free at both levels when they meet the qualified distribution rules.
Withholding and Reporting
Massachusetts requires state income tax withholding on IRA distributions whenever federal withholding is taken, and you cannot waive the state portion if federal withholding applies. The state withholding rate on eligible rollover distributions is 5%. The default federal withholding rate on most IRA distributions is 10% of the taxable portion.9Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
Full-year residents report on Form 1 with Schedule X; part-year residents use Form 1-NR/PY with the same worksheet.4Mass.gov. Tax Treatment of Non-Government Pensions in Massachusetts Because the 1099-R doesn’t track Massachusetts basis, losing your own records can cost you tax-free treatment you’re entitled to.
Residency Decides Everything
Whether Massachusetts can tax your IRA distribution at all depends on where you live when you take it. You’re a full-year resident if you’re domiciled in Massachusetts, or if you maintain a permanent place of abode in the state and spend more than 183 days there.10Mass.gov. Legal and Residency Status in Massachusetts Residents owe Massachusetts tax on IRA distributions from all sources.
Non-residents don’t. Massachusetts taxes non-residents only on income from a Massachusetts trade or business, employment performed in the state, or ownership of Massachusetts real or tangible property.11Cornell Law School. 830 CMR 62.5A.3 – Massachusetts Source Income of Nonresidents IRA distributions are intangible income, so a non-resident owes zero Massachusetts tax on them even if the IRA was funded entirely while living in Massachusetts.12Mass.gov. Tax Treatment of Pensions in Massachusetts Federal law reinforces the result: under 4 U.S.C. § 114, no state may tax the retirement income of a non-resident, and IRA distributions fall within the statute’s protection.13Office of the Law Revision Counsel. 4 U.S. Code 114 – Limitation on State Income Taxation of Certain Pension Income
Part-year residents split the year. Massachusetts taxes distributions received while you were a resident, not those received after you established residency elsewhere. If you’re planning a move out of state, the timing of a large withdrawal or a Roth conversion relative to your change of residency can meaningfully change your state tax bill.
Other Retiree Benefits That Offset the Bill
IRA distributions don’t get a special exemption in Massachusetts, but other retirement income does, which affects your overall picture. Social Security benefits are entirely excluded from Massachusetts gross income regardless of how much you earn.14Mass.gov. Massachusetts Tax Information for Seniors and Retirees Massachusetts state and local government contributory pensions are fully exempt.15Massachusetts Department of Revenue. Tax Treatment of Government Pensions in Massachusetts U.S. military retired pay is excluded for both residents and nonresidents.16Massachusetts Department of Revenue. MA Tax Information for Military Personnel and Their Spouses Private pensions and IRA distributions receive none of these exclusions.
Taxpayers who are 65 or older by December 31 of the tax year receive an additional $700 personal exemption on top of the standard filing-status exemption, with each spouse qualifying separately on a joint return.17Mass.gov. Massachusetts Personal Income Tax Exemptions The Senior Circuit Breaker credit is worth checking too. If you’re 65 or older and own or rent your Massachusetts principal residence, you may qualify for a refundable credit based on the property taxes or rent you paid, up to $2,820 for tax year 2025.18Massachusetts Department of Revenue. Massachusetts Senior Circuit Breaker Tax Credit Because it’s refundable, it can offset state tax owed on IRA distributions or generate a refund if it exceeds your liability.