North Carolina

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North Carolina Military Resource Locator
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Summary of North Carolina Military and Veterans Benefits: The State of North Carolina offers special benefits for its military Service members and Veterans including property tax exemptions, state employment preferences, education and tuition assistance, vehicle tags, as well as hunting and fishing license privileges. Eligibility for some benefits may depend on residency, military component, and Veteran disability status.

North Carolina Military and Veterans State Benefit Highlights and Eligibility


What are my North Carolina Military and Veterans State Taxes Benefits?

North Carolina Retired Military Pay Income Taxes: If an individual had five years of creditable service as of August 12, 1989, all military retired pay is exempt from taxes. Effective for taxable years beginning on or after January 1, 2014, there are no deductions available for distributions from private retirement plans or government retirement plans that do not qualify as tax-exempt Bailey benefits.

As a result of the North Carolina Supreme Court's decision in Bailey v. State of North Carolina and the settlement subsequently reached in that case, North Carolina may not tax retirement benefits received by a retiree (or by a beneficiary of a retiree) from qualifying State, local, or federal retirement systems if the retiree was vested in the retirement system as of August 12, 1989. For most government retirement systems, a person is vested if the person had five or more years of creditable service in a qualifying State, local or federal retirement system as of August 12, 1989.
State of North Carolina, Individual Income Tax, Pass-Through Entities, and Withholding Bulletin Dec 2018

Learn more about North Carolina Retired Military Pay Income Taxes

North Carolina State Taxes on U.S. Department of Veterans Affairs Military Disability Retired Pay: Military Disability Retirement Pay received as a pension, annuity or similar allowance for personal injury or sickness resulting from active service in the Armed Forces should not be included in taxable income if any of the following conditions apply:

  • You were entitled to receive a disability payment before September 25, 1975;

  • You were a member of the military (active or reserves) or were under a binding written commitment to become a member on September 24, 1975;

  • You receive disability payments for a combat-related injury. This is a personal injury or sickness that:

    • Resulted directly from armed conflict,

    • Took place while you were engaged in extra-hazardous service,

    • Took place under conditions simulating, including training exercises such as maneuvers, or

    • Was caused by an instrumentality of war.

You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it (the exclusion under this condition equals the amount you would be entitled to from the VA).

All disability payments to Veterans by reason of service in the Armed Forces are not reportable as income for income taxation purposes.
North Carolina Tax Relief Fact Sheet

Learn more about North Carolina State Taxes on U.S. Department of Veterans Affairs Military Disability Retired Pay

Military Survivor Benefit Plan (SBP)/ Reserve Component Survivor Benefit Plan (RCSBP)/ Retired Serviceman’s Family Protection Plan (RSFPP) North Carolina State Tax Benefits: Dividends and all other proceeds except interest on dividends from G. I. insurance policies are exempt from income taxation.

 Learn more about Military Survivor Benefit Plan (SBP)/ Reserve Component Survivor Benefit Plan (RCSBP)/ Retired Serviceman’s Family Protection Plan (RSFPP) North Carolina State Tax Benefits

North Carolina State Taxes on U.S. Department of Veterans Affairs Disability Dependency and Indemnity Compensation: Dependency and Indemnity Compensation (DIC) is a tax-free monetary benefit paid to eligible survivors of military Service members who died in the line of duty or eligible survivors of Veterans whose death resulted from a service-related injury or disease.

Learn more about North Carolina State Taxes on U.S. Department of Veterans Affairs Disability Dependency and Indemnity Compensation

North Carolina Tax Relief for Service Members and Certain Veterans: North Carolina offers the following tax benefits to Service members and eligible Veterans:

Cancellation of Certain Assessments and Abatement of Income Tax: Any assessment of income tax due prior to the time a person was inducted into the Armed Forces will be canceled and abated if the Service member was killed while a member of the Armed Forces or is receiving service-connected disability compensation. No interest is payable on refunds made under this section of the law.

Allowances for Service Members: Subsistence and quarters allowances, uniform and equipment allowances, and mustering-out payments are not taxable to the Service member as income. Mileage and per diem allowances for official travel and transportation are excludable from the Service  member's income except to the extent that they exceed the travel and transportation expenses.

Deductions for Service Members : Income tax deduction may be claimed for insignia, swords, aiguillettes, epaulets, campaign bars, cap devices, chinstraps, and the cost of altering uniforms necessitated by change in rank.

Education and Training Allowances : U. S. Department of Veterans Affairs payments made to Veterans enrolled in schools and training establishments under the GI Bill are exempt from income taxation.

Grants for Motor Vehicles : Grants by the U. S. Department of Veterans Affairs for motor vehicles for Veterans who lost their sight, or the use of their limbs are exempt from income taxation.

Grants for Specially Adapted Housing : Grants by the U. S. Department of Veterans Affairs to seriously disabled Veterans for homes designed for wheelchair livings are exempt from income taxation.

Gratuity Pay, Six-Months : The six-month gratuity pay to a beneficiary of a deceased Service member is exempt from income taxation.

Real Property Tax : This program excludes up to the first $45,000 of the appraised value of the permanent residence of an honorably discharged Veteran who has a total and permanent disabi