NC Retirement Income Planning 2026 — What You Actually Pay

100% of Social Security benefits are excluded from NC state income tax, regardless of income level.

100% of military retirement income is excluded from NC state income tax.

Retirement income from NC state and local government service is fully exempt from NC income tax.

Residents 65+ can exclude up to $35,000/year of qualifying retirement income. The amount above $35,000 is taxed at 4.25%.

Complex rules — some federal pension income may qualify for Bailey settlement exemption depending on hire date. Consult a CPA.

All earned income is taxed at NC's flat 4.25% rate (2026). No exemptions.

Couple — SS + Federal Pension

Income: $42,000 SS + $38,000 pension = $80,000 total

NC Tax: SS fully exempt. Pension may be exempt under Bailey settlement (verify with CPA). Potential NC tax: $0–$1,275/year depending on pension eligibility.

Note: Federal government retirees should verify Bailey settlement status before assuming full exemption.

Single — SS + IRA Withdrawals

Income: $24,000 SS + $30,000 IRA = $54,000 total

NC Tax: SS fully exempt. IRA: $35,000 excluded, remaining $0 (under limit). NC tax on this profile: approximately $0.

Note: IRA withdrawals under $35K/year are effectively tax-free in NC for residents 65+.

Couple — SS + 401k/IRA + Part-time Work

Income: $38,000 SS + $50,000 IRA + $20,000 consulting = $108,000 total

NC Tax: SS exempt. IRA: $35,000 excluded, $15,000 taxed at 4.25% ($638). Consulting: $20,000 taxed at 4.25% ($850). Total NC tax: ~$1,488/year.

Note: Still well below most Northeastern states for this income level.