Tool | August 2013
State-by-State Guide to Taxes on Retirees
State Sales Tax
4.75%. Prescription drugs and medical equipment are exempt. Food is subject to a 2% county tax. Localities may add up to 2.75% tax.
Income Tax Range
Low: 6% (on up to $12,750 of taxable income for single filers and up to $21,250 for married couples filing jointly)
High: 7.75% (on taxable income over $60,000 for single filers and over $100,000 for married couples filing jointly)
Note: The graduated income tax rates will be replaced with a flat tax of 5.8% for 2014 and 5.75% for 2015 and beyond.
Benefits are not taxed.
Exemptions for Other Retirement Income
North Carolina offers a break of at least $4,000 in exclusions for pensions from federal, state and local governments (depending on dates and length of service). It also offers an exemption of up to $2,000 for qualified private pensions, including IRAs. Out-of-state government pensions also qualify for the $4,000 exemption. But note: These two tax breaks have been eliminated starting in 2014.
(A tax break known as the “Bailey exemption” remains; this tax break exempts from taxation certain retirement benefits received by a state or federal government retiree, if the retiree had five or more years of creditable service as of August 12, 1989.)
Residential property is assessed based on 100% of the appraised value. Taxes are collected by cities and counties. Median property tax on the state's median home value of $155,500 is $1,209, according to the Tax Foundation.
Tax breaks for seniors: To qualify for the Elderly or Disabled Exclusion, a homeowner must be at least 65 years old or totally and permanently disabled, with income of no more than $27,100 for the previous tax year. The program excludes the first $25,000 or 50% of the assessed value (whichever is greater) from taxation. The state’s Circuit Breaker Tax Deferment Program limits property taxes to 4% of an owner’s income for those 65 years and older who make less than $27,100 a year. For those making between $27,100 and $40,650, property taxes are limited to 5% of their income.
There is no inheritance tax and no estate tax.
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