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Retirement income is taxable in the state of NC but they do allow you to exclude at least a portion of your retirement benefits.
If you received retirement benefits as a former employee of the State of North Carolina or any of its local governments or as a former employee of the federal government and you did not have five years of service with the government as of August 12, 1989, you may deduct the amount included in federal taxable income or $4,000, whichever is less. This deduction also applies to retirement benefits paid to former teachers and state employees of other states and their political subdivisions regardless of the five year service date. If you are married filing jointly and both you and your spouse received federal, state, or local government retirement benefits, you may each deduct up to a maximum of $4,000 for a total of $8,000.
If your federal taxable income includes retirement benefits from a private retirement plan, you may be able to deduct up to $2,000. If you received retirement benefits from more than one private retirement plan, you will not get a separate $2,000 deduction for each distribution. You may only deduct the total amount included in federal taxable income or $2,000, whichever is less. If you received both government and private retirement benefits, your maximum deduction is the total amount included in federal taxable income or $4,000, whichever is less.
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