Military Retirement Pay State Income Tax Exemption
100% deduction of military retirement pay from NC state income tax for veterans with 20+ years or medical retirement.
State BenefitNorth CarolinaTax Benefits
Verified September 30, 2026 against ncdor.gov
At a glance
- Benefit type
- Tax Benefits — North Carolina
- Who it's for
- Veterans, Survivors
- VA rating needed
- No rating requirement
- Estimated value
- Varies by retirement pay (3.99% savings for tax year 2026)
- Where it applies
- North Carolina
- Last verified
- September 30, 2026
What is Military Retirement Pay State Income Tax Exemption?
Military Retirement Pay State Income Tax Exemption is a North Carolina tax benefits benefit for veterans, survivors. 100% deduction of military retirement pay from NC state income tax for veterans with 20+ years or medical retirement. The listed value is Varies by retirement pay (3.99% savings for tax year 2026).
Who qualifies
- Veterans
- Survivors
- Available to any veteran
- North Carolina residency
Who is eligible
Eligibility
Veteran who served at least 20 years in the uniformed services OR was medically retired under 10 U.S.C. Chapter 61 (severance pay excluded). Deduction also applies to payments to beneficiaries under a Plan defined in 10 U.S.C. § 1447 (Survivor Benefit Plan). Effective for taxable years beginning on or after January 1, 2021. Separately, the "Bailey Settlement" exempts retirement income based on service that includes 5+ years of creditable service earned before August 1989.
What Military Retirement Pay State Income Tax Exemption covers
Covers
100% deduction of qualifying military retirement payments from NC state income tax (to the extent included in adjusted gross income). NC flat individual income tax rate is 4.25% (2025) and is scheduled to drop to 3.99% (2026). For a $30,000/year military pension, this saves roughly $1,200-$1,275/year.
How to apply for Military Retirement Pay State Income Tax Exemption
How to claim
Claimed on your NC state income tax return. No separate application.
Verified information & sources
- Last verified
- September 30, 2026
- Official source
- ncdor.gov
Compiled and fact-checked against the official source linked above. Benefit rules and dollar amounts change over time — always confirm current details at the official source before applying. A county Veterans Service Officer (VSO) is a free, accredited advocate who can review your eligibility and help you file at no cost.
How VetUnlock verifies benefitsFrequently asked questions about Military Retirement Pay State Income Tax Exemption
Who qualifies for Military Retirement Pay State Income Tax Exemption?
Military Retirement Pay State Income Tax Exemption is for Veterans, Survivors; available to any veteran; north carolina residency. See the eligibility details on this page and confirm with the official source before applying.
How much is Military Retirement Pay State Income Tax Exemption worth?
The listed value is Varies by retirement pay (3.99% savings for tax year 2026). Amounts can change — confirm the current figure at the official source linked on this page.
How do I apply for Military Retirement Pay State Income Tax Exemption?
Apply through the official source linked on this page. A county Veterans Service Officer (VSO) can review your eligibility and help you file at no cost.
Where can I verify Military Retirement Pay State Income Tax Exemption?
Benefit rules and dollar amounts change, so always confirm current details at the official source linked on this page. A free, accredited county or state Veterans Service Officer (VSO) can also verify your eligibility and help you apply.