Listed below is income that North Carolina will allow you to subtract on your return:
Taxable Retirement Benefits That Qualify For The Bailey Settlement
North Carolina does not tax retirement benefits received by any retirees of the State and its local governments by the U.S. government retires (including Military), under the Supreme Court decision in Bailey v. North Carolina. The exclusion does not apply to retirement benefits that is paid to former teachers or other state employees of another state and political subdivisions.
Retirement Benefits received by a retired member of the US Armed Forces not deducted in other retirement benefits
You may deduct payments received from the United States government if you are a retired member who made Uniformed Service retirement payments and served at least 20 years in the Uniformed Service or was medically retired from the Uniformed Service or a beneficiary of a retired member who served at least 20 years and received payment(s) from the Survivor Benefit Plan.
Important: If you are a Retiree of the United States Uniformed Services who deducted retirement income under "Bailey", you may not use this deduction on the same retirement income.
Recognized IRC Section 1400Z-2 gain
You may subtract a 1400-Z-2 gain included in federal AGI to the extent it was included in a prior year when calculating state taxable income.
Adjustment For Bonus Depreciation Added Back In Prior Years
You deduct an amount equal to 20% of the bonus depreciation deduction that was added to your federal AGI in a prior year each year for 5 years following the original add back.
Section 179 Expense Deduction Added Back In Prior Years
You may subtract an amount equal to 20% of the section 179 expense deduction that was added to your federal AGI in a prior year each year for 5 years following the original add back.
Interest Income From US Obligations
You may enter amounts of interest received from U.S. obligations, such as notes and bonds.
Other Subtractions from Income
For more information or a list of the Other Subtractions, please click here.
Program Entry
To enter these subtractions on your North Carolina return, follow the steps below:
- State
- Edit (three dots)
- Subtractions from Income