TaxtirementState guides · NC
How North Carolina taxes retirement income
- North Carolina doesn't tax Social Security benefits.
- Exclusions and subtractions for retirement income (details below):
- Bailey settlement: retirement benefits of vested NC state/local and federal retirees.
- Rates for 2026: 3.99% flat rate.
At a glance
| Income tax | Yes |
|---|---|
| Rates (2026) | 3.99% flat rate |
| Starts from | Federal adjusted gross income (AGI) |
| Standard deduction | $12,750 single, $25,500 married filing jointly |
| Social Security | Not taxed |
| Retirement income exclusions | 1 (see below) |
| Roth conversions | Taxable |
| Capital gains | Taxed like other income |
| Local income tax | None |
Social Security
North Carolina doesn't tax Social Security benefits.
Pensions, IRAs and 401(k)s
Bailey settlement: retirement benefits of vested NC state/local and federal retirees (D-400 Schedule S line 20)
100% deduction of retirement benefits included in federal AGI from certain defined benefit plans (NC TSERS, NC LGERS, NC Consolidated Judicial, FERS, CSRS, military) if the retiree had 5 or more years of creditable service as of August 12, 1989; also from the State's 401(k) and 457 plans if the retiree contributed or contracted to contribute before August 12, 1989. Does NOT apply to local government 457 plans, 403(b) plans, or other states' public pensions. Beneficiaries of qualifying retirees also qualify. Not income-limited. Taxtirement needs a user flag ('Bailey-vested') since vesting date cannot be inferred.
Roth conversions
A Roth conversion counts as taxable income for North Carolina. Whether a retirement income exclusion can cover part of it depends on the rules above.
Capital gains
Taxed like other income, at the rates above.
More detail from our research notes
NC taxable income = federal AGI + additions - deductions (Schedule S: Social Security and Tier 1/Tier 2 railroad retirement benefits included in federal AGI [line 19], Bailey retirement [line 20], uniformed services retirement for 20+ years or medical retirement [line 21], U.S. obligation interest) - NC standard deduction or NC itemized deductions. NC standard deduction is fixed by statute (not the federal amount, not indexed) and has NO additional amount for age 65 or blind; MFS standard deduction is $0 if the spouse itemizes. No personal exemptions. Flat rate 3.99% for 2026 (S.L. 2023-134; confirmed unchanged for 2026 by S.L. 2026-41 (S.B. 257) s. 44.1, approved July 7, 2026, which replaces revenue triggers with scheduled cuts: 3.49% for 2027-2029, 3.24% for 2030-2032, 2.99% after 2032, with up to two further triggered 0.25-pt cuts in 2035-2040 to a 2.49% floor). No general retirement or pension exclusion: private pensions, IRA/401(k) distributions and Roth conversions are fully taxable at 3.99%. Because NC starts from federal AGI, the OBBBA senior deduction (below AGI) has no NC effect. NC has no senior-specific income tax credits; property tax relief for seniors (homestead exclusion/circuit breaker) is outside the income tax. No local income taxes.
Pending confirmation
These points were still being confirmed against North Carolina's published 2026 forms when this page was built. Most are waiting on forms the state publishes around the turn of the year.
1 item
- 2026 D-400/D-401 not yet published (expected December 2026 at https://www.ncdor.gov/taxes-forms/individual-income-tax). 3.99% for 2026 is confirmed by G.S. 105-153.7(a) as rewritten by S.L. 2026-41 s. 44.1 and the 2026 NC-30; the standard deduction ($12,750/$25,500/$19,125/$12,750) is confirmed by the current G.S. 105-153.5(a)(1) text; only the form layout remains.
Sources
Every figure comes from these documents, mostly the state's own forms, instructions and statutes.
- Individual income tax rates by year (2025 4.25%, 2026 and later 3.99%, triggers from 2027)https://www.ncdor.gov/taxes-forms/individual-income-tax/tax-rate-schedules
- NC standard deduction amounts; no additional amount for 65+ or blindhttps://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/north-carolina-standard-deduction-or-north-carolina-itemized-deductions
- 2025 D-401 instructions: Schedule S line 19 Social Security/RRB deduction, line 20 Bailey settlement rules, line 21 uniformed services retirement; D-400 Schedule A itemized deductions: real estate tax up to $10,000, with mortgage interest up to $20,000; charity; medical over 7.5% (D-401 2025 pp. 20-21)https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
- S.B. 257 (2026) future rate schedule, 2026 rate unchanged at 3.99% - secondaryhttps://taxnews.ey.com/news/2026-1630-north-carolina-law-progressively-lowers-personal-income-tax-rate-over-several-years
- S.L. 2026-41 (S.B. 257, approved July 7, 2026) s. 44.1: G.S. 105-153.7(a) 3.99% (2026), 3.49% (2027-2029), 3.24% (2030-2032), 2.99% after 2032; (a1) triggers struck for 2027-2034, kept as 0.25-pt cuts to a 2.49% floor for TY2035-2040; s. 44.2: wagering…https://www.ncleg.gov/EnactedLegislation/SessionLaws/PDF/2025-2026/SL2026-41.pdf
- G.S. 105-153.5(a)(1) standard deduction tablehttps://www.ncleg.gov/EnactedLegislation/Statutes/PDF/BySection/Chapter_105/GS_105-153.5.pdf
- 2026 NC-30 withholding: 3.99% for tax year 2026, $12,750 single standard deductionhttps://www.ncdor.gov/taxes-forms/withholding-tax
Taxtirement's North Carolina calculation is also checked against a second, independent implementation on 1,000 random households. How we check our numbers.
See your own years. Taxtirement applies these North Carolina rules, and the federal and Medicare rules, to your household for every year of retirement, and shows the calculation behind each number. Coming November 2026 for iPhone, iPad and Mac.
This page summarizes North Carolina's 2026 rules as Taxtirement applies them, for education and planning. It isn't tax advice, and it doesn't cover every situation (for example part-year residents, businesses or military-only provisions). Rules change; check the state's current instructions, or a tax professional, before you act. Spotted something wrong? Tell us.