Massachusetts does not tax SSDI benefits, even if your federal return includes them as income

If you receive Social Security Disability Insurance (SSDI) and live in Massachusetts, you will not owe state income tax on those benefits. Massachusetts is one of the states that excludes SSDI from its taxable income calculation entirely. This means you can report SSDI on your federal return (where it may or may not be taxable depending on your other income) without worrying about a Massachusetts state tax bill on that money.

The key difference is that federal tax rules and Massachusetts tax rules do not always match. The federal government taxes SSDI only if your combined income exceeds certain thresholds. Massachusetts straightforward does not tax SSDI at all, regardless of how much other income you have. If you are filing a Massachusetts state return, SSDI is excluded from the income figure the state uses to calculate what you owe.

Key Takeaways

  • Massachusetts excludes all SSDI income from state taxation, so you will not owe Massachusetts income tax on SSDI benefits.
  • This exemption applies whether you receive SSDI alone or combined with other income sources like wages or pensions.
  • You may still owe federal income tax on SSDI if your total combined income is high enough, even though Massachusetts taxes none of it.
  • When you file your Massachusetts return, you report SSDI separately so the state can exclude it from your taxable income.

How to report SSDI on your Massachusetts tax return

When you file a Massachusetts state income tax return, you will report your SSDI income on the form, but it will not count toward the income the state taxes. Massachusetts Form 1-NR/PY (for part-year residents or nonresidents) and Form 1 (for full-year residents) both have a line where you enter SSDI and other nontaxable income. Entering it on the form ensures the state knows you received it and can properly exclude it.

You will receive a Social Security Benefit Statement (Form SSA-1099) each January showing how much SSDI you received in the previous year. Use this form to fill in the SSDI amount on your Massachusetts return. Even if you do not owe federal tax on your SSDI, you should still file a state return if you have any other income, because Massachusetts may tax wages, investment income, or other sources.

When you might still owe federal tax on SSDI

Massachusetts taxing SSDI and the federal government taxing SSDI are separate questions. You could owe nothing to Massachusetts but still owe federal tax on the same SSDI income. The federal threshold depends on your "combined income," which includes half of your SSDI plus all your other income (wages, interest, pensions, and so on). If that combined total exceeds $25,000 (single) or $32,000 (married filing jointly), some of your SSDI becomes taxable at the federal level.

For example, if you are single, receive $15,000 in SSDI, and earn $12,000 in wages, your combined income is $19,500 ($7,500 from half your SSDI, plus $12,000 in wages). That is below the $25,000 threshold, so you owe no federal tax on the SSDI. But if you earned $18,000 in wages instead, your combined income would be $25,500, and some SSDI would become taxable federally. Massachusetts would still tax you on zero of it.

Other income that Massachusetts does tax

While SSDI is exempt, Massachusetts taxes most other income sources. Wages, salaries, and self-employment income are all taxable. Interest and dividend income are taxable. Pension and retirement account distributions are taxable (with some exceptions for military pensions and certain other sources). If you receive Supplemental Security Income (SSI) instead of or in addition to SSDI, SSI is also exempt from Massachusetts taxation.

If you have income from multiple sources, you will report all of them on your Massachusetts return. The state will calculate tax only on the income that is not exempt. SSDI and SSI are the main Social Security programs that Massachusetts excludes; other income types are generally taxable unless a specific exemption applies.

Filing requirements if you receive SSDI in Massachusetts

You must file a Massachusetts state income tax return if your income exceeds the filing threshold for your age and filing status. The threshold changes each year. Even if your SSDI alone is below the threshold, you must file if you have other taxable income (like wages) that pushes you over it. The SSDI itself does not count toward the threshold, but other income does.

If you are unsure whether you need to file, you can contact the Massachusetts Department of Revenue or use their online resources to check the current year's threshold. Filing even when you do not owe tax can be worthwhile if you are due a refund from taxes withheld on wages or other income.

Frequently Asked Questions

Do I have to report SSDI on my Massachusetts return if I do not owe tax?

You should report it if you are filing a return, because it helps the state verify your income and may support you are not taxed on it. If you do not file a return at all, you do not need to report SSDI separately. But if you file for any reason (to claim a refund, for example), include the SSDI on the form.

What if I moved to Massachusetts partway through the year?

You will file a part-year resident return using Form 1-NR/PY. You report only the SSDI and other income you received while living in Massachusetts. The state taxes only income earned or received during the months you were a resident.

Does Massachusetts tax SSDI if I am receiving it while working?

No. Massachusetts does not tax SSDI under any circumstances. Your wages will be taxed, but the SSDI portion of your income is always exempt from Massachusetts state tax, regardless of how much you earn from work.

Will I owe back taxes on SSDI if I did not report it before?

No. Since Massachusetts does not tax SSDI, there is no back tax owed on it. If you filed returns in previous years without reporting SSDI, you do not owe additional Massachusetts tax. However, if you had other taxable income you did not report, that could create a separate issue.