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State-by-State Guide to Taxes on Retirees

North Carolina is a favorite destination for retirees. Social Security benefits are exempt from state income taxes. There are also tax breaks for public pensions and qualified private pensions. Real estate is assessed at 100% of appraised value. Homeowners 65 and older may qualify for a homestead exemption of up to $25,000 or 50% of the permanent residence’s appraised value, whichever is greater.

STATE SALES TAX
4.75%. Prescription drugs and medical equipment are exempt. Food is subject to a 2% county tax. Counties may add an additional 2% to 3% tax.

INCOME-TAX RANGE
Low: 6% (on up to $12,750 of taxable income for single filers and $21,250 for married couples filing jointly)
High: 7.75% (on taxable income over $60,000 for single filers, and over $100,000 for married couples filing jointly)

SOCIAL SECURITY
Benefits are not taxed.

EXEMPTIONS FOR OTHER RETIREMENT INCOME
North Carolina offers a break of at least $4,000 in exclusions for pensions from federal, state and local governments (depending on dates and length of service). It also offers an exemption of up to $2,000 for qualified private pensions, including IRAs. Out-of-state government pensions also qualify for the $4,000 exemption.

PROPERTY TAXES
Property is assessed based on 100% of appraised value. Taxes are collected by cities and counties.

Tax breaks for seniors: The state has a property-tax deferment program. Under this program, taxes for each year are limited to a percentage of the qualifying owner’s income. The qualifying owner must be at least 65 years old or be totally and permanently disabled. For an owner whose income for the previous tax year does not exceed the income-eligibility limit for the current year, which is $27,100 for 2012, this program excludes the first $25,000 or 50% of assessed value (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 $27,100 a year. For those making between $27,100 and $40,650, property taxes are limited to 5% of their income.

INHERITANCE AND ESTATE TAXES
There is no inheritance tax. There is an estate tax for estates of more than $5.12 million, and the maximum rate is 16%.

Visit RetirementLiving.com for a complete rundown of taxes in North Carolina, or click here to choose another state.

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