State and Local Taxes If You Retire in Massachusetts

Massachusetts offers retirees a state with history and culture, with many options in terms of activities and lifestyle, in rural areas, small towns, and big cities, from the Berkshire Mountains in the west to Cape Cod and the Atlantic seaboard in the east. As indicated by Top Retirements, the cost of living and housing in the Boston Metro area can be very high, but life can be much more affordable in other parts of the state. According to the Tax Foundation, the overall state and local tax burden in Massachusetts was 10.0% of income in 2009, higher than the national average of 9.8%.

Income tax

Most income is subject to a flat 5.3% state income tax in Massachusetts, but social security benefits are exempt. Also exempt are civil service and Massachusetts state and local government pensions. Pensions from other state or local governments are not subject to tax in Massachusetts if the other state does not tax pension income for Massachusetts public employees. Pensions for military service are also exempt.

You can claim an additional exemption on your Massachusetts state income tax return if you are 65 or older. And you can claim an exemption for medical and dental expenses if you itemize deductions on your federal tax return.

If your income is below a certain amount based on your filing status you could qualify for the Low Income Credit. This alternative tax calculation is for taxpayers who are close to the limit for having to file a return and can significantly reduce your taxes.

Property taxes

Property values and taxes vary considerably throughout Massachusetts. According to the Tax Foundation, the median property taxes paid on a home in Massachusetts overall in 2009 were $3,511, ranking the state sixth in the country. As a percentage of median home value, Massachusetts ranked 21^st at 1.04%. The Boston Globe provides a comparison by community throughout the state for the period from 2000 to 2010.

Local boards of assessors in Massachusetts can grant property tax exemptions to senior citizens, veterans and surviving spouses, and cities and towns can also grant a residential exemption on your principal residence. If you are 70 or older, or 65 or older if approved by the city or town, you could qualify for an exemption for a certain amount or a percentage of the assessed property value if you meet certain requirements in terms of your income and the value of your assets. There is another basic exemption for a lower amount but with less strict requirements.

Veterans with a service-connected disability can qualify for a partial or total property tax exemption in Massachusetts, depending on the degree of disability. Surviving spouses of qualified veterans are also eligible for this exemption.

Sales tax

Massachusetts has a 6.5% state sales tax. Food, other than served in restaurants and other establishments, is tax exempt. Also exempt are prescription drugs and various other health care products, clothing up to $175, gas, heating fuel, and electricity.

Sources:

The Facts on Massachusetts' Tax Climate, Tax Foundation

Guide to Personal Income Tax, Massachusetts Department of Revenue

A Guide to Sales and Use Tax, Massachusetts Department of Revenue

Mass. Property Values and Taxes -- The Boston Globe

Property Tax Information -- Massachusetts Department of Revenue

Property Taxes on Owner-Occupied Housing by State, 2004 -- 2009, Tax Foundation

Retire in the best Massachusetts retirement communities, Top Retirements