Raleigh-Durham · Tax Guide

North Carolina Retirement Taxes — What You Actually Pay in 2026

Social Security is fully exempt. Military retirement is fully exempt. You get a $35K exclusion on other retirement income. And the flat income tax rate keeps dropping. Here's why NJ, MD, and IL retirees are moving to the Triangle — and the actual math behind it.

The Short Version

Social Security incomeEXEMPT100% exempt from NC state income tax
Military retirement payEXEMPT100% exempt from NC state income tax
Pension / 401k / IRA withdrawals (65+)PARTIALUp to $35,000/year excluded from NC tax
NC flat income tax rate (2026)4.25%Applied to taxable income above exemptions; scheduled to decrease further
Property tax — homestead exemption (65+)UP TO $25KUp to $25,000 off assessed value; reduces annual property tax bill
Estate / inheritance taxNONENC has no estate or inheritance tax

What Retirees Moving from High-Tax States Actually Save

The biggest migration flow into the Triangle comes from New Jersey, Maryland, Pennsylvania, New York, and Illinois — states that tax retirement income aggressively. Here's how the comparison typically plays out for a couple with $80,000 in retirement income ($30K Social Security + $50K pension/IRA):

Moving from New Jersey

SS Exempt in New Jersey?

No

Pension/IRA Tax

~$2,800/yr on $50K

Est. Annual Savings in NC

~$2,500–$4,000/yr

Moving from Maryland

SS Exempt in Maryland?

Yes

Pension/IRA Tax

~$2,250/yr on $50K (partial exemption)

Est. Annual Savings in NC

~$1,500–$3,000/yr

Moving from Illinois

SS Exempt in Illinois?

Yes

Pension/IRA Tax

State pension often exempt; 401k/IRA taxed at 4.95%

Est. Annual Savings in NC

Depends on income structure

Moving from New York

SS Exempt in New York?

Yes

Pension/IRA Tax

Up to $20K exempt; rest taxed up to 6.85%

Est. Annual Savings in NC

~$1,000–$3,000/yr

These are estimates based on publicly available state tax rates as of 2025–2026. Individual savings vary significantly based on income composition. Always consult a CPA for your specific situation before making a move decision.

The Homestead Exemption — Don't Overlook It

North Carolina offers a homestead property tax exclusion for residents who are 65 or older (or permanently disabled) and meet income requirements. The exclusion removes up to $25,000 — or 50% of the assessed value, whichever is greater — from your taxable property value.

On a $450K home in Durham County (tax rate ~1.04%), the standard annual tax bill is about $4,680. With a $25K homestead exclusion, the taxable value drops to $425K — saving roughly $260/year. Not transformative, but it's money you don't pay.

You apply at your county assessor's office after closing. It doesn't happen automatically. Add it to your move-in checklist.

Related Resources

True Monthly Cost — All Triangle Communities→Triangle vs Charlotte — Which Market Wins?→← Raleigh-Durham Market Hub→

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