Retiring in North Carolina: how your income is taxed
North Carolina is less tax-friendly for retirees. On a typical retirement income it ranks #42 of 51 for the lowest state income tax.
The rules in North Carolina
- Social Security: North Carolina fully deducts Social Security benefits at any income level.
- Pensions: Private pensions are taxed at the flat NC rate. Under the Bailey settlement, NC state/local and federal (including military) pensions are fully excluded if the retiree had 5+ years of creditable service as of Aug 12, 1989; later-vested government pensions are taxed.
- 401(k), 403(b) and IRA withdrawals: 401(k) and IRA withdrawals are taxed. The exception: government 401(k) and 457 plans qualify for the Bailey exclusion if the retiree contributed before August 12, 1989.
Calculate your North Carolina retirement taxes
State income tax in North Carolina: $1,087 a year
In North Carolina, the 401(k)/IRA amount counts as IRA withdrawals, which don't qualify for the pension exclusion. Enter withdrawals from employer plans such as a 401(k) or 403(b) as pension.
In North Carolina you'd pay about $1,087 in state income tax and $4,336 in federal income tax on $70,000 of retirement income, keeping $64,577 (7.7% total).
North Carolina ranks #42 of 51 for the lowest state tax on this income. 19 states charge no state income tax on this income.
What retirees pay in North Carolina
| Retirement income | State tax (single) | State tax (married) | Federal tax (single) |
|---|---|---|---|
| $24,000 Social Security, $12,000 401(k)/IRA | $0 | $0 | $0 |
| $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA | $1,087 | $579 | $4,336 |
| $40,000 Social Security, $40,000 pension, $50,000 401(k)/IRA, $10,000 other income | $3,481 | $2,973 | $19,812 |
Age 67 or older, 2026 rules including the federal senior deduction. For married couples, income is the household total and both spouses are 67 or older. State estimates apply North Carolina's main exclusions and may differ for income-tested credits.
States with lower retirement taxes
Moving to North Carolina in retirement?
Compare the tax on your Social Security, pension and 401(k)/IRA income, and typical living costs, with the state you'd leave. These are the states most households moving to North Carolina come from (IRS migration data, 2022–2023).
- Florida to North Carolina
- South Carolina to North Carolina
- Virginia to North Carolina
- New York to North Carolina
- California to North Carolina
- Georgia to North Carolina
Frequently asked questions
Does North Carolina tax Social Security?
Not taxed. North Carolina fully deducts Social Security benefits at any income level.
Does North Carolina tax pensions?
Taxed. Private pensions are taxed at the flat NC rate. Under the Bailey settlement, NC state/local and federal (including military) pensions are fully excluded if the retiree had 5+ years of creditable service as of Aug 12, 1989; later-vested government pensions are taxed.
Does North Carolina tax 401(k) and IRA withdrawals?
Taxed. 401(k) and IRA withdrawals are taxed. The exception: government 401(k) and 457 plans qualify for the Bailey exclusion if the retiree contributed before August 12, 1989.
Is North Carolina a good state to retire for taxes?
For a single retiree with $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA, North Carolina charges about $1,087 in state income tax, ranking #42 of 51 (lowest tax first).
Related
Sources: ncdor.gov, ncdor.gov (2), ncdor.gov (3). Rules reviewed .