No, North Carolina does not tax Social Security benefits. If any portion of your benefits was included in your federal adjusted gross income, you subtract it on your state return so North Carolina never taxes it.1NCDOR. Social Security and Railroad Retirement Benefits The federal government is a different story: depending on your total income, the IRS may tax up to 85% of what you receive. So the practical question for most North Carolina retirees isn’t the state tax at all. It’s the federal one, plus knowing which line to use to keep the state from touching your benefits.
What the Federal Government Taxes
The IRS looks at what it calls your combined income (sometimes called provisional income) to decide how much of your Social Security is taxable. You get it by adding your adjusted gross income, any tax-exempt interest such as income from municipal bonds, and half of your total Social Security benefits.2Internal Revenue Service. Publication 915 (2025), Social Security and Equivalent Railroad Retirement Benefits
Then you compare that number to the base amount for your filing status:
- Single, head of household, or qualifying surviving spouse: $25,000
- Married filing jointly: $32,000
- Married filing separately, if you lived apart from your spouse all year: $25,000
- Married filing separately, if you lived with your spouse at any point in the year: $0
If your combined income sits between your base amount and the next threshold ($34,000 single, $44,000 joint), up to 50% of your benefits may be taxable. Above those upper thresholds, up to 85% can be taxed.2Internal Revenue Service. Publication 915 (2025), Social Security and Equivalent Railroad Retirement Benefits Stay below your base amount and none of your benefits are federally taxed.
The married-filing-separately rule catches people. If you lived with your spouse at any time during the year and file separately, your base amount is $0, which means up to 85% of your benefits are almost certainly taxable.3Internal Revenue Service. Social Security Income Couples in that position should run the numbers both ways before deciding.
How to Subtract Social Security on Your North Carolina Return
Each January, the Social Security Administration sends Form SSA-1099 showing the total benefits you received the year before.4Social Security Administration. How Can I Get a Replacement Form SSA-1099/1042S, Social Security Benefit Statement Box 5 is what you use on the federal return. Whatever taxable amount ends up in your federal adjusted gross income then has to come back out on the state side.
North Carolina’s individual income tax return, Form D-400, starts with your federal adjusted gross income. To remove the Social Security portion, you fill out Form D-400 Schedule S and enter the taxable Social Security amount on Line 19.5NCDOR.gov. North Carolina Individual Income Tax Instructions – Form D-401 (2025) Only the portion that was federally taxed gets subtracted; benefits that were never included in your federal AGI are already out and cannot be deducted again.1NCDOR. Social Security and Railroad Retirement Benefits
Railroad retirement benefits get the same treatment. Tier 1 and Tier 2 payments are exempt from North Carolina income tax by federal law, and any taxable amount included in your federal AGI comes out on Schedule S the same way.5NCDOR.gov. North Carolina Individual Income Tax Instructions – Form D-401 (2025)
For tax year 2025, both your federal and North Carolina returns are due by April 15, 2026.6NCDOR. NCDOR Opens 2026 Individual Income Tax Filing Season
Disability, Survivor, and SSI Benefits
Social Security disability (SSDI) and survivor benefits are taxed under the same federal thresholds as retirement benefits. The IRS treats all three identically for income tax purposes, so the combined-income math above applies.7Internal Revenue Service. Regular and Disability Benefits North Carolina exempts them the same way it exempts retirement benefits.
Supplemental Security Income (SSI) is not Social Security. SSI payments are not taxable federally or at the state level, and you will not receive an SSA-1099 for them.3Internal Revenue Service. Social Security Income If SSI is your only income, you likely do not need to file at all.
Other Retirement Income Is Not Exempt
The favorable treatment stops at Social Security. Distributions from 401(k)s, traditional IRAs, and private pensions are taxed at North Carolina’s flat income tax rate: 4.5% for tax year 2024, 4.25% for 2025, and 3.99% for 2026 and beyond.8NCDOR. Tax Rate Schedules
Two carve-outs are worth knowing about if they might apply to you. Under the Bailey decision, retirees from federal, state, and local government defined benefit plans pay no North Carolina tax on their retirement benefits if they had five or more years of creditable service as of August 12, 1989. For state 401(k) and 457 plans, the test is whether you contributed or contracted to contribute before that date.9NCDOR. Bailey Decision Concerning Federal, State and Local Retirement Benefits Government hires after that date do not qualify.
Military retirement pay is also fully exempt from North Carolina income tax if you served at least 20 years in the Armed Forces or were medically retired under 10 U.S.C. Chapter 61. Severance pay received on separation does not qualify.10NCDOR. Military Retirement