What a contribution saves in Massachusetts
The table shows three owners, each making the largest first-year contribution their age and income allow. Massachusetts's top rate is 9%, and how much a contribution saves depends on which brackets it comes out of.
| Owner | Contribution | Federal | Massachusetts | Total |
|---|---|---|---|---|
| Sole proprietor, 45, $250,000 profit, single | $156,000 | $32,700 | Not deductible | $32,700 |
| S corporation, 52, $250,000 salary and $250,000 profit, married | $223,000 | $50,800 | $11,200 | $62,000 |
| Sole proprietor, 58, $600,000 profit, married | $282,000 | $93,000 | Not deductible | $93,000 |
Savings are lower than the contribution times your top rate because a large contribution reaches down into lower brackets, and because for many owners it also reduces the 20% qualified business income deduction. Your own figures depend on your income, filing status and other deductions. The estimate works them out for you.
How Massachusetts treats the deduction
Massachusetts is one of three states, with the others listed in states that tax retirement contributions, that do not follow the federal deduction for a self-employed owner's contributions. The notes below explain what that means and how an S corporation differs.
Massachusetts taxes a self-employed owner's contributions
Massachusetts does not allow a self-employed owner or partner to deduct contributions to a defined benefit plan, profit sharing or a 401(k). Contributions made by an S corporation for its owner-employee are deductible. The same owner can get a different state result depending on how the business is set up.
Massachusetts allows previously taxed contributions to be recovered when benefits are paid.
Income over $1,107,750 carries a 4% surtax. That threshold for 2026 comes from secondary sources and was not confirmed against the Department of Revenue.
If you retire somewhere else
Money in a cash balance plan is taxed when it comes out, not when it goes in. Federal law stops a state from taxing retirement income paid from a qualified plan to someone who no longer lives there (4 U.S.C. 114). So the state you live in when you take the money out is the one that can tax it.
For someone who contributes while living in Massachusetts, where the top rate is 9%, and later retires in a state with lower or no income tax, that can make the state saving permanent rather than a deferral.
Deadlines are federal
The dates that matter are the same in every state: the plan can be adopted for 2026 up to your business's extended filing deadline, and corporations have to run the salary the plan counts through payroll by December 31. See cash balance plan deadlines or find your dates.