State-by-State Guide to Taxes on Retirees - North_Carolina
Tool | November 2019

State-by-State Guide to Taxes on Retirees

North Carolina

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The Bottom Line
Flag of North Carolina

Mixed Tax Picture

The Tar Heel state has and eliminated most breaks for retiree income, leaving many retirees paying the state’s flat tax. Homeowners 65 and older may qualify for an Elderly or Disabled Exclusion on property taxes, and North Carolina’s sales taxes are on the low side, particularly for a southern state.

State Sales Tax

4.75% state levy. Localities can add as much as 2.75%, and the average combined rate is 6.97%, 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. The 2018 rate is 5.49%; the 2019 rate is 5.25%.

Effective tax rate: 5.49% for single filers, 5.49% for joint filers

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Income from federal government, designated North Carolina state and local government, and military retirement plans is exempt if the retiree had five or more years of creditable service as of August 12, 1989. This exemption is known as the “Bailey exemption.”

Railroad Retirement benefits are also exempt.

Property Taxes

In North Carolina, residents pay an average of $894 in taxes per $100,000 of assessed home value.

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 2018. The program excludes the first $25,000 or 50% of the home’s appraised value plus the value of up to 1.0 acre of land, 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 2018. For those making between $29,601 and $44,000 for 2018, 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

None.

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