Is military retirement pay taxed in North Carolina?
By a Navy veteran. Updated October 2026.
Most likely no
North Carolina: Most guides list it as fully exempt. One older guide lists it as taxed. Federal income tax still applies to retired pay in every state.
Sources disagree for North Carolina. Published guides do not agree on this state’s rule, so treat the figure above as a planning estimate and confirm it with the North Carolina Department of Revenue before you decide.
What this means for your plan
North Carolina exempts military retired pay, so your retired pay is not reduced by state income tax. Other income, such as a second job, a spouse’s wages or business profit, is generally still taxed under North Carolina’s normal rules.
VA disability pay is not taxed by the federal government, and most states follow that treatment.
Local taxes in North Carolina
No local income tax that we know of. Confirm with your city or county.
Questions
Does North Carolina tax military retirement pay?
Most likely no. Most guides list it as fully exempt. One older guide lists it as taxed.
Is VA disability pay taxed in North Carolina?
VA disability compensation is not taxed by the federal government, and most states follow that treatment. Confirm with the North Carolina Department of Revenue.
Where do I confirm the rules for North Carolina?
Use the North Carolina Department of Revenue and the DFAS retired pay tax page. Rules change, so check the current year before you decide where to live.
See it for your family
The free planner puts your retired pay, VA pay and North Carolina tax on one 24-month timeline, so you can see the month money gets tight. The States tab in the full version compares all 50 states and DC side by side.
Open the plannerSource and method
This summary comes from the state treatment data in the Runway planner, compiled from published state guides. It is not an official ruling. For the official rule, see the North Carolina Department of Revenue and the DFAS retired pay tax page.