How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Christopher Phelps Your Own Question

Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
84937
Type Your Tax Question Here...
Christopher Phelps is online now
A new question is answered every 9 seconds

Is a Federal pension subject to NC State Tax

Resolved Question:

I receive a Federal annuity and my spouse will receive a Maryland State pension. Does the State of North Carolina offer tax relief to retirees? If so, to what extent? Thanks
Submitted: 9 years ago.
Category: Tax
Expert:  Christopher Phelps replied 9 years ago.

If you are receiving a federally taxable retirement plan distribution under the former federal FERS system and you had at least 5 years of creditable service as of 8/12/89 (yes, thats 1989) then you may exclude ALL of your benefits from N.C. taxation. Report the deduction on line 42 of N.C. Individual Income tax return form D-400. No such FULL exemption is available for retirement distributions from plans of other states.


If you do not qualify for this exemption both you and your wife will qualify for N.C.'s general retirement deduction of up to the lesser of your taxable retirement distributions or $4,000 each. Thus, you may report a reduction in your N.C. taxable income of up to $8,000 for retirement plan benefits you receive that are taxable for Federal purposes. This deduction is reported on line 43 of Form D-400.


To the extent your retirement benefits are exempted on line 42, you may not take an additional deduction on line 43. Thus, if your benefits are exempt completely on line 42 because you qualified, then you may only take a $4,000 deduction on line 43 to reduce your wife's taxable retirement benefits.


Here is a link to the form http://www.dor.state.nc.us/downloads/D400_D400TC.pdf.


Also, here is a link to the D-400 instructions http://www.dor.state.nc.us/downloads/D401.pdf. See page 10 for a discussion of the retirement benefit exclusions.


Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.

Customer: replied 9 years ago.
Reply to Christopher Phelps's Post: My pension is under the CSRS, not FERS. What are my NC state tax obligations? What about my wife's MD state pension?
Expert:  Christopher Phelps replied 9 years ago.

The civil service retirement system is also eligible to be excluded fully under the North Carolina Bailey Supreme Court decision if you had the requisite 5 years of credited service as of 8/12/89. Thus, if you met the credited service requirement you may fully exclude your CSRS retirement benefits from N.C. income taxes. To claim this deduction you must enter on line 42 of form D-400 the amount of your CSRS retirement benefits taxed for Federal purposes. Your wife's MD retirement benefits are not eligible for this exclusion (see below).


If you do not qualify for the full exemption under the Bailey decision, you and your wife may exclude up to a maximum of $4,000 each from N.C. income taxes under the general retirement benefit exclusion. This exclusion is available to everybody who receives retirement/pension benefits. To claim this deduction you enter the lesser of your retirement/pension benefits taxable for Federal purposes r $4,000 for each of you. Thus, if you received $8,000 in benefits and your wife received $5,000, your max exclusion on line 43 is $8,000. Alternatively, if you received $8,000 and your wife only received $3,000, then your exclusion would be $7,000. Remember, if you fully excluded your benefits under the Bailey decision on line 42, you may not take the $4,000 for YOUR benefits. You may still take the exclusion for your wife's benefits.

Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and 8 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.