Does NC Tax Military Retirement Income?
As a veteran or a military retiree living in North Carolina, it’s essential to understand how your military retirement income will be taxed. In this article, we’ll delve into the details of North Carolina’s tax laws and explore whether your military retirement income is subject to state taxes.
What is Military Retirement Income?
Military retirement income refers to the payments received by military personnel upon retirement from active duty. This includes:
• Retirement Pay: The monthly payments received by military personnel upon retirement, which is based on their years of service and final pay.
• Disability Compensation: Payments received by military personnel who have been injured or become disabled during their service.
• Survivor Benefits: Payments received by the spouse or dependents of a deceased military personnel.
Is Military Retirement Income Taxable in NC?
North Carolina does tax military retirement income, but the tax rate and exemptions may vary depending on your individual circumstances. Here are some key points to consider:
• Federal Taxation: Military retirement income is subject to federal income tax, but it is exempt from state and local taxes in most states, including North Carolina.
• NC State Taxation: North Carolina does tax military retirement income, but it is subject to a special exemption.
• Exemption: Military retirement income is exempt from state income tax in North Carolina, but only up to a certain amount. For tax year 2022, the exemption is $20,000 for single filers and $40,000 for joint filers.
How is Military Retirement Income Taxed in NC?
Here’s a breakdown of how military retirement income is taxed in North Carolina:
| Taxable Amount | Tax Rate |
|---|---|
| $0 – $20,000 (single) / $0 – $40,000 (joint) | 0% |
| Above $20,000 (single) / Above $40,000 (joint) | 5.25% |
Other Considerations
In addition to the exemption, there are other factors to consider when it comes to taxing military retirement income in North Carolina:
• Cost-of-Living Adjustment (COLA): The COLA is an annual increase in military retirement pay to keep pace with inflation. This increase is taxable as ordinary income.
• Veterans’ Benefits: Certain veterans’ benefits, such as disability compensation and education benefits, are exempt from state income tax in North Carolina.
• Taxes on Other Income: If you have other sources of income, such as a part-time job or investments, these will be subject to state income tax in North Carolina.
Conclusion
In conclusion, military retirement income is taxable in North Carolina, but it is subject to a special exemption. The exemption amount is $20,000 for single filers and $40,000 for joint filers. It’s essential to understand how your military retirement income will be taxed to plan your finances effectively. By taking advantage of the exemption and understanding the tax implications, you can ensure that your military retirement income goes further.
Additional Resources
For more information on North Carolina’s tax laws and military retirement income, you can visit the following resources:
- North Carolina Department of Revenue: www.ncdor.gov
- North Carolina General Assembly: www.ncleg.net
- Federal Benefits for Veterans, Dependents and Survivors: www.va.gov/benefits
Remember to consult with a tax professional or financial advisor to ensure that you are taking advantage of all the tax benefits available to you as a military retiree in North Carolina.
