Retirement Benefits Deduction
Retirement benefits are amounts paid by an employer to a former employee
beneficiary after the employment ends as required under a written retirement
plan. Retirement benefits also include amounts you received from an individual
retirement account or from an individual retirement annuity (IRA). North Carolina
does not tax all of
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 adjusted gross
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
$4,000 for a total of $8,000.
If your federal adjusted gross income includes retirement benefits from a private
retirement plan, you may be able to deduct up to $2,000. If you received retirement
from more than one private retirement plan, you will not get a separate $2,000
deduction for each distribution. You may deduct only the total amount included
in federal adjusted gross 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 adjusted gross income or $4,000, whichever is less.
An individual is not required to have ceased employment to qualify for the
$2,000 deduction for distributions from an individual retirement account or
an individual retirement annuity.
If your employer has a structure change and you receive a retirement distribution
but do not cease employment with that employer, you do not qualify
for the retirement deduction. For example, if company A merged with company
B and you continue to work with the merged company, you may not claim a retirement
deduction on your State return because you never ceased employment.
The deduction for retirement benefits is allowed only to the extent the benefits
are included in federal adjusted gross income. If you elect to roll-over distributions
from your retirement plan, you may not take a
deduction on your North Carolina return because the distributions are
not included in
your federal adjusted gross income.
If you included retirement benefits in federal adjusted gross income, complete the
Retirement Benefits Worksheet in the instructions for Form D-400. Enter the
result on the applicable line on page 3 of Form D-400. The deduction will
reduce your North Carolina taxable income.
Include your 1099Rs with your North Carolina tax return when claiming this
Last modified on:
01/03/13 03:39:47 PM.