Skip to content

State retirement taxes · 2026

Does North Carolina tax retirement income?

Short answer: Yes — everything except Social Security. North Carolina does not tax Social Security benefits. Only Bailey-vested government pensions (and 20-year military) are exempt; private pensions and IRAs are taxed.

Friendly2026 rules Verified October 23, 2026

What’s taxed in North Carolina

2026 rules.

Social SecurityNot taxed
North Carolina does not tax Social Security benefits.
PensionsTaxed
Private pensions are taxed; only government retirees vested by August 12, 1989 (the Bailey settlement) are fully exempt.
IRA & 401(k) withdrawalsTaxed
IRA, 401(k) and 403(b) withdrawals are fully taxable.
Military retirement payPartly taxed
Fully deductible if you served at least 20 years or were medically retired (plus Survivor Benefit Plan payments to beneficiaries); others may qualify under Bailey, or else it’s taxed.
Income tax rate3.99% flat
A flat 3.99% for 2026 (4.25% in 2025).

Does North Carolina tax Social Security?

North Carolina does not tax Social Security benefits.

Social Security and Railroad Retirement benefits are not subject to North Carolina income tax, with no income or age limit.

Your federal return is a separate question — see how much of your benefit the IRS taxes with the taxable Social Security calculator.

Are pensions taxed in North Carolina?

Private pensions are taxed; only government retirees vested by August 12, 1989 (the Bailey settlement) are fully exempt.

Under the Bailey settlement, North Carolina state and local and federal (including military) pensions are 100% excluded if the retiree had five or more years of creditable service as of August 12, 1989. Other NC and federal government pensions are taxable (military has its own rule, below). Pensions from other states’ governments are taxable.

Public vs. private pensions: Private pensions: taxed. Government pensions: exempt only if vested under Bailey (5+ years by August 12, 1989).

Are IRA and 401(k) withdrawals taxed in North Carolina?

IRA, 401(k) and 403(b) withdrawals are fully taxable.

There is no age-based exclusion. The Bailey exception covers NC state 401(k) and 457 plans only for amounts contributed or contracted before August 12, 1989.

Required minimum distributions (RMDs) are IRA and 401(k) withdrawals, so the same rules apply. Estimate your RMD.

Is military retirement pay taxed in North Carolina?

Fully deductible if you served at least 20 years or were medically retired (plus Survivor Benefit Plan payments to beneficiaries); others may qualify under Bailey, or else it’s taxed.

What is North Carolina’s income tax rate?

A flat 3.99%.

A flat 3.99% for 2026 (4.25% in 2025). Now fixed in law: 3.49% for 2027–2029, 3.24% for 2030–2032 and 2.99% from 2033, with possible triggered cuts to 2.74% and then 2.49% in 2035–2040.

Standard deduction and exemptions

Standard deduction: $12,750 single or married filing separately, $19,125 head of household, $25,500 joint or surviving spouse (2025 amounts, unchanged for 2026). No personal exemption.

What tax breaks do seniors get in North Carolina?

None based on age: North Carolina has no extra standard deduction for 65+ and does not allow the federal $6,000 senior deduction.

What changed for 2026?

S.L. 2026-41 (the 2026 Appropriations Act, effective July 7, 2026) replaced the old trigger schedule with set rates: 3.49% (2027–2029), 3.24% (2030–2032), 2.99% (2033 on). It also allows gambling losses as an itemized deduction from 2025. No change to retirement provisions.

The 2026 rate is set by S.L. 2026-41; deductions come from the 2025 D-401 instructions, unchanged.

How North Carolina compares with its neighbors

Thinking of moving across the line? Here’s how each bordering state treats retirement income in 2026.

State tax is half the picture — check the federal side

Is My Social Security Taxable?How much of your Social Security is taxable using the IRS worksheet — and what the new $6,000 senior deduction changes.Open RMD CalculatorYour required minimum distribution for 2026 or 2027, the exact deadline, and the IRS table math behind it.Open IRMAA CalculatorWill your income trigger Medicare's IRMAA surcharge? See your tier, the yearly cost, and how far you are from the next cliff.Open

North Carolina retirement tax questions

Is North Carolina tax-friendly for retirees?

We rate North Carolina “Friendly” for 2026. North Carolina does not tax Social Security benefits. Only Bailey-vested government pensions (and 20-year military) are exempt; private pensions and IRAs are taxed. The top income tax rate is 3.99%.

Are required minimum distributions (RMDs) taxed in North Carolina?

RMDs are withdrawals from IRAs and 401(k)-type plans, so they follow North Carolina’s rules for those accounts. IRA, 401(k) and 403(b) withdrawals are fully taxable.

Is military retirement pay taxed in North Carolina?

Partly. Fully deductible if you served at least 20 years or were medically retired (plus Survivor Benefit Plan payments to beneficiaries); others may qualify under Bailey, or else it’s taxed.

What is North Carolina’s income tax rate for 2026?

A flat 3.99% for 2026 (4.25% in 2025). Now fixed in law: 3.49% for 2027–2029, 3.24% for 2030–2032 and 2.99% from 2033, with possible triggered cuts to 2.74% and then 2.49% in 2035–2040.

Sources for North Carolina

Primary sources only. We re-check them whenever an agency publishes new figures.

  1. State
    NC Department of Revenue — 2025 D-401 instructions
  2. State
    NC General Assembly — Session Law 2026-41
  3. State
    NC General Assembly — S257 legislative summary
  4. State
    NC Department of Revenue — Withholding tables and instructions

Did this answer your question?

Compare all 50 states and DC