Massachusetts Military Retirement and Survivor Annuity Income Exclusion

Massachusetts taxes income at a flat rate and then deducts specified items from gross income. Subparagraph (E) of G.L. c. 62, s. 2(a)(2) is the provision that matters to a military retiree, and it does two things in one sentence. First, it deducts any income received from the United States government as retirement pay for a retired member of the Uniformed Services of the United States, as defined in 10 U.S.C. section 1072, regardless of whether the retiree contributed to the retirement system. The clause about contribution is doing real work. The rest of subparagraph (E) exempts income from a contributory annuity, pension, endowment or retirement fund of the United States government or the commonwealth to which the employee has contributed. Military retired pay is non-contributory, so without the express words it would fall outside. The legislature put them in. The reference to 10 U.S.C. 1072 also decides who counts. The uniformed services there are the Army, Navy, Air Force, Marine Corps, Space Force and Coast Guard, plus the commissioned corps of the National Oceanic and Atmospheric Administration and of the Public Health Service. A retired NOAA Corps officer or a retired Public Health Service officer receives the same treatment as a retired soldier, which is not true in every state in this catalog. Second, and less well known, the same subparagraph deducts any income received from the United States government as survivorship benefits under 10 U.S.C. sections 1431 to 1460, inclusive. That range is the Retired Serviceman's Family Protection Plan and the Survivor Benefit Plan. A surviving spouse receiving an SBP annuity deducts it from Massachusetts gross income. That is worth stating plainly because the question is genuinely open in other states. Nebraska's exclusion is written around retirement benefits attributable to service performed by "an individual" before "his or her" retirement, reported on a Form 1099-R, and it does not name survivor annuities; a surviving spouse there has to ask the revenue department. Massachusetts names the federal sections and removes the argument. What this does not do, and does not need to do. VA disability compensation is not included in federal gross income and Massachusetts does not tax it. Chapter 61 disability retired pay excluded from federal gross income under section 104 of the Internal Revenue Code never reaches the Massachusetts calculation either. A veteran whose only income is VA compensation has nothing to report and nothing to deduct. There is no age condition, no rating condition and no election to make. A retiree at thirty-eight with twenty years of service deducts the pay on the same terms as one at seventy. Two related provisions in the same chapter. Section 6K lets any filer voluntarily contribute part of a refund, or add to an amount due, to the Massachusetts Military Family Relief Fund created by G.L. c. 10, s. 35CC, which helps Massachusetts Guard members and residents in the reserves called to active duty after September 11, 2001, and their families, with food, housing, utilities and medical costs. That fund is fed by taxpayer check-off and gifts rather than appropriation, and the money is paid to the Friends of Massachusetts National Guard and Reserve Families to distribute. And G.L. c. 62, s. 2 carries the general rule that income excluded from federal gross income for a death in a combat zone, and disability income attributable to injuries incurred as a direct result of a terroristic or military action, is outside Massachusetts gross income too.