Tool | November 2018

State-by-State Guide to Taxes on Retirees

North Carolina

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Map of North Carolina

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The state has switched from graduated income tax brackets to a flat tax and eliminated a number of breaks for retiree income. Homeowners 65 and older may qualify for an Elderly or Disabled Exclusion.

State Sales Tax

4.75% state levy. Localities can add as much as 2.75%, and the average combined rate is 6.95%, according to the Tax Foundation. Groceries are not taxed by the state, but a 2% local tax is levied.

Income Tax Range

North Carolina has a flat tax rate of 5.49%.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

A tax break known as the "Bailey exemption" remains despite the elimination of previous tax breaks; 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. Railroad Retirement income is not taxed.

IRAs

Taxable at the flat tax rate.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Taxable at the flat tax rate.

Private Pensions

Taxable at the flat tax rate.

Public Pensions

Taxable at the flat tax rate.

Property Taxes

The median property tax on North Carolina's median home value of $157,100 is $1,345.

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 $29,600 for the 2018 tax year. The program excludes the first $25,000 or 50% of the home's 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 $29,600 a year for the 2018 tax year. For those making between $29,601 and $44,400 for the 2018 tax year, property taxes are limited to 5% of their income.

Vehicle Taxes

Registration: 3% tax due when title is transferred, revenue from this tax is specifically allocated to maintenance of North Carolina highways. Property tax: Annual, determined by multiplying the combined county and municipal/district tax rate by the county tax appraisal of the vehicle. Example: In Wake County (Raleigh), a vehicle worth $20,000 would be taxed about $252 each year.

Inheritance and Estate Taxes

There is no inheritance tax and no estate tax.

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