Retiring to North Carolina vs NYS

Retiring to North Carolina is a popular state for many New Yorkers.  Recent changes to North Carolina tax law make it an unfriendly state for NYC retirees.  The following examples compare two fictitious couples who are reviewing the tax consequences of retiring to North Carolina vs. Ulster County, New York.  The first couple, John (age 60) & Mary (age 60), are both retired from NYC jobs and are taking distributions from their retirement plans.  The second couple, Bill (age 60) & Linda (age 60), has one person retired from a NYC job and the other person still working.

John & Mary NYS vs. NC

NYS NC
John’s NYPD pension $60,000 $60,000
Mary’s NYC TRS pension $60,000 $60,000
John’s NYC DCP distribution $20,000 $20,000
Mary’s NYC TDA distribution $30,000 $30,000
Total income $170,000 $170,000
Less NYC pensions ($120,000) N/A
Less NYS pension/annuity exclusion ($20,000) N/A
Less NYC TDA ($30,000) N/A
Adjusted gross income $0 $170,000
Less standard deduction N/A ($15,000)
Taxable income $0 $155,000
State tax $0 $8,913

 

Bill & Linda NYS vs. NC

NYS NC
Bill’s NYPD pension $60,000 $60,000
Linda’s wages $40,000 $40,000
Bill’s NYC DCP distribution $20,000 $20,000
Total income $120,000 $120,000
Less NYC pension ($60,000) N/A
Less NYS pension/annuity exclusion ($20,000) N/A
Adjusted gross income $40,000 $120,000
Less standard deduction ($15,650) ($15,000)
Taxable income $24,350 $105,000
State tax $1,019 $6,038

 

Other notable recent tax disadvantages of North Carolina:

  • Does not have an itemized deduction for medical/dental expenses
  • Mortgage interest and real estate tax deductions are limited to a total of $20,000 per year
  • Personal exemptions for children and any qualifying relative no longer apply
  • No longer has a limited deduction for out of state pensions

North Carolina Sales Tax Rate:

  • State sales tax rate of 4.75% + county + city sales tax rate. The total sales tax rate for most counties is 6.75% to 7%.  It should be noted that NYS also has a high sales tax rate (4%) plus county/city rate.  The total NYS/county/and city sales tax rates range from 7% to 8 7/8%.

Social Security Retirement Benefits:

  • Currently, not taxed by either NYS or NC.

 

Disclaimer:  This post is not intended as tax advice.  The determination of how the tax laws affect a taxpayer is dependent on the taxpayer’s particular situation.  A taxpayer may be affected by exceptions to the general rules and by other laws not discussed here.