Veterans Alliance is privately owned and operated to serve veterans. We are not affiliated with the Department of Veterans Affairs.

Veterans Alliance — Veterans Alliance
← All North Carolina benefits
otherstate

Military Retirement Pay Deducted in Full — After Twenty Years

North Carolina deducts the whole of your military retirement, uncapped. But you need twenty years of service, a chapter 61 medical retirement, or to be a Survivor Benefit Plan beneficiary.

Verified August 18, 2026

What this benefit is

North Carolina deducts the whole of your military retirement, uncapped. But you need twenty years of service, a chapter 61 medical retirement, or to be a Survivor Benefit Plan beneficiary.

What it's worth: The whole of your military retirement deducted, at North Carolina’s flat rate

  • The deduction is uncapped — it applies to the full amount included in adjusted gross income.
  • Estimated against North Carolina’s flat individual income tax rate applied to a typical career retirement.

Who is entitled to it

  • You receive military retirement pay or a Survivor Benefit Plan payment.
  • You served at least twenty years, which is what the deduction requires.
  • You were medically retired under 10 U.S.C. chapter 61.
  • You receive Survivor Benefit Plan payments from an eligible retired member.
  • Your home is in North Carolina.

Not sure whether that describes you?

Answer a few questions about this benefit specifically — we only ask what this one actually depends on, and we stop as soon as we know.

How to claim it

Deadline: April 15, with your return
  1. 1Check your years of service before anything else. Under twenty years, and without a chapter 61 medical retirement, this deduction is closed to you.
  2. 2Claim it as a deduction on your North Carolina return for the amount included in adjusted gross income.
  3. 3You cannot claim the same amount under this provision and under the Bailey settlement provision — pick one.
File with
The North Carolina Department of Revenue, with your annual return
Documents you will need
form 1099 r · dd214
Annual
Claimed once a year.
CorrectionNorth Carolina is widely listed as simply exempting military retirement. The twenty-year service requirement is real and is the reason some retirees are refused. A medical retirement under 10 U.S.C. chapter 61 is the alternative, and a Survivor Benefit Plan beneficiary of an eligible member qualifies in their own right.
Worth knowingApplies to taxable years beginning on or after 1 January 2022. Anyone who filed for 2022 or later without claiming it should look at amending.
Worth knowingFor a career retiree this is worth far more than the $45,000 property tax exclusion, every single year. The property exclusion gets the attention because it is the one written for disabled veterans.

Sources

This finder provides an informational match, not a government eligibility determination. The responsible agency decides your application.