North Carolina does not tax Social Security benefits
North Carolina is one of the states that does not impose an income tax on Social Security retirement, survivor, or disability benefits. This means the monthly payments you receive from Social Security are not subject to North Carolina state income tax, regardless of your total income or filing status.
However, your Social Security income may still be taxable at the federal level. The federal government uses a formula based on your "combined income" — which includes half your Social Security benefits plus all other income sources — to determine whether you owe federal tax on your benefits. North Carolina's exemption applies only to state taxes, not federal ones.
If you live in North Carolina and receive Social Security, you will not file a state income tax return on those benefits. But you may still need to file a federal return, and you should report your Social Security income there if required.
Key Takeaways
- North Carolina does not tax Social Security benefits at the state level, so you owe no state income tax on those payments.
- The federal government may still tax your Social Security benefits depending on your combined income, even though North Carolina does not.
- You do not need to report Social Security income on your North Carolina state tax return, but you may need to report it to the IRS.
- If you work and receive Social Security at the same time, North Carolina taxes only your wages and other income, not the Social Security portion.
How federal taxation of Social Security works
The IRS taxes Social Security benefits using a "combined income" calculation. Combined income equals your adjusted gross income plus nontaxable interest plus half your Social Security benefits. If your combined income exceeds certain thresholds, a portion of your benefits becomes taxable at the federal level.
For 2024, the thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. If your combined income falls below these amounts, you owe no federal tax on your Social Security. If it exceeds them, up to 50 percent or 85 percent of your benefits may be taxable, depending on how far over the threshold you go.
North Carolina's exemption does not change this federal calculation. You still report your Social Security income to the IRS on Form 1040, and you still determine whether any portion is taxable using the federal thresholds. The difference is that North Carolina will not tax that same income a second time.
What counts as income for the federal threshold
Combined income includes wages from work, self-employment income, pensions, interest, dividends, capital gains, and distributions from retirement accounts like IRAs or 401(k)s. It also includes nontaxable interest from municipal bonds. Importantly, it includes half of your Social Security benefits themselves, which is why even modest other income can push you over the federal threshold.
If you are still working and receiving Social Security before your full retirement age, you also need to know about the earnings test. Social Security reduces your monthly benefit by $1 for every $2 you earn above an annual limit (the limit changes yearly and is different in the year you reach full retirement age). This reduction is separate from taxation — it affects how much Social Security actually pays you, not whether you owe tax on it.
North Carolina state income tax on other retirement income
While North Carolina exempts Social Security, it does tax other forms of retirement income. Pensions, 401(k) withdrawals, IRA distributions, and annuity payments are all subject to North Carolina state income tax. If you receive a pension from a former employer or government job, you will owe state tax on that income.
North Carolina offers a limited deduction for military pensions and some government employee pensions, but the deduction has income limits and does not apply to all retirees. If you receive a private pension or withdraw from a retirement account, you should expect to owe state tax unless you may have access to for a specific exemption.
Filing requirements if you receive Social Security in North Carolina
You do not file a North Carolina state income tax return based on Social Security income alone. However, if you have other income — wages, a pension, interest, or self-employment income — you may be required to file a state return depending on the total amount.
North Carolina's filing threshold for 2024 is $12,750 for single filers under 65 and $16,050 for those 65 and older. If your non-Social Security income exceeds these amounts, you must file a state return. The state will not tax your Social Security, but it will tax everything else.
At the federal level, the IRS has separate thresholds. You may need to file a federal return even if you do not file a state return, depending on your combined income and filing status. The IRS website and Form 1040 instructions provide the current federal thresholds.
How to report Social Security on your tax return
On your federal return, Social Security benefits appear on Form SSA-1099, which you receive from the Social Security Administration by January 31 each year. You report this amount on line 5b of Form 1040. The IRS worksheet then calculates whether any portion is taxable based on your combined income.
On your North Carolina state return, you do not report Social Security at all. If you file Form NC-1040, you simply omit Social Security income from your calculations. You report only wages, pensions, and other taxable income that North Carolina recognizes.
If you have questions about whether you owe federal tax on your Social Security, the IRS provides Publication 915, which walks through the combined income calculation step by step. You can also contact the IRS directly or work with a tax preparer who can apply your specific numbers to the federal thresholds.
Frequently Asked Questions
Do I have to pay North Carolina income tax on my Social Security?
No. North Carolina does not tax Social Security benefits at the state level. You will not owe state income tax on your monthly Social Security payments, no matter how much other income you have.
Will I owe federal tax on my Social Security in North Carolina?
It depends on your combined income. If your adjusted gross income plus nontaxable interest plus half your Social Security benefits exceeds $25,000 (single) or $32,000 (married filing jointly), a portion of your benefits may be taxable at the federal level. North Carolina's exemption does not change the federal calculation.
What if I receive both a pension and Social Security?
North Carolina will tax your pension but not your Social Security. You owe state tax on the pension income. At the federal level, both the pension and Social Security count toward your combined income, which determines whether your Social Security is federally taxable.
Do I need to file a North Carolina tax return if I only receive Social Security?
No, not based on Social Security alone. You only file a North Carolina return if you have other income above the state threshold ($12,750 for single filers under 65 in 2024). Social Security does not trigger a filing requirement by itself.
Where do I report Social Security on my federal return?
Report your Social Security on line 5b of Form 1040. The amount comes from your Form SSA-1099, which Social Security sends you by January 31. Use the IRS worksheet to calculate whether any portion is taxable based on your combined income.