A portion of your retirement allowance is federally taxable. Please refer to IRS publication 575. The IRS requires that you pay 90% of the income tax that you will owe by having an amount withheld on a payroll plan or by filing an estimated quarterly tax return. If you wish, we will withhold a fixed amount of money from each retirement check you receive. You can change the amount of taxes withheld from your retirement check anytime you wish. Please notify the Board of any tax changes you might wish to make. We will ensure that you receive the appropriate form. State Income Tax Your retirement allowance is exempt from Massachusetts state taxes. When considering a move outside of the Commonwealth you should question whether or not your contributory pension will be taxed by your prospective new home state. Currently fifteen states do not tax Mass. pensions. In addition several states provide tax exemptions or exclusions for which Mass. pensions may qualify. For example, Maine offers a $6,000 pension exemption, while pensioners, 59 ½ or over, may qualify for a $20,000 exemption in New York.