Veteran taxes by state
North Carolina veteran taxes
How North Carolina treats military retired pay and Survivor Benefit Plan annuities in its income tax, and its property tax and vehicle registration relief for disabled veterans — from the state’s own pages.
On this page5 sections
- Military retired pay
- Partly exempttax year 2025
- SBP annuities
- Partly exempt
- Property tax
- Exemption or credit
- Vehicle registration
- Fee waiver or discount
Military retired pay in North Carolina
Partly exempttax year 2025Sources 1, 2
North Carolina lets a retired member of the U.S. uniformed services deduct uniformed-services retirement pay in full if the member served at least 20 years or was medically retired under 10 U.S.C. Chapter 61 (N.C. Gen. Stat. § 105-153.5(b)(5a); Form D-400 Schedule S, line 21); severance pay under Chapter 61 does not qualify. Retirees who had five or more years of creditable service as of August 12, 1989 may instead exclude benefits under the Bailey settlement (line 20), but not the same income twice. Other military retired pay has no specific deduction in these sources.
Survivor Benefit Plan annuities
Partly exemptSources 3, 2
North Carolina lets a beneficiary deduct Survivor Benefit Plan payments (10 U.S.C. § 1447) only if the deceased retired member served at least 20 years or was medically retired, that is, was eligible for the uniformed-services retirement deduction (N.C. Gen. Stat. § 105-153.5(b)(5a)b; Schedule S, line 21). The Bailey exclusion also covers benefits received by beneficiaries of vested federal retirees.
Property tax relief for disabled veterans
Exemption or creditSources 4, 5
North Carolina excludes the first $45,000 of appraised value of the permanent residence of a disabled veteran: a veteran whose character of service at separation was honorable or under honorable conditions and who, as of January 1 before the tax year, has a VA certification of a service-connected, permanent and total disability or has received specially adapted housing benefits under 38 U.S.C. § 2101 (N.C. Gen. Stat. § 105-277.1C). There is no age or income limit, and the owner must be a North Carolina resident; a veteran who takes this exclusion may not receive other property tax relief.
- Application: Form AV-9 with Form NCDVA-9 (completed by a Veterans Service Officer) to the county tax assessor, by June 1 to be timely.
- A residence owned by a married couple gets the full exclusion even if only one spouse qualifies.
Surviving spouse
The surviving spouse of a disabled veteran, or of a veteran whose death the VA certified as the result of a service-connected condition, keeps the exclusion while a North Carolina resident who has not remarried (N.C. Gen. Stat. § 105-277.1C(b)(1)c, (b)(4a)); the Department of Revenue’s 2027 Form AV-9 also covers the unremarried surviving spouse of a servicemember who died from a service-connected condition in the line of duty.
Vehicle registration for disabled veterans
Fee waiver or discountSources 6, 7
North Carolina issues the 100% Disabled Veteran plate free of charge each year, one plate for a motor vehicle and one for a motorcycle, to a veteran who suffered a 100% service-connected disability; the free issue does not apply to a vehicle with a registered weight over 6,000 pounds (N.C. Gen. Stat. §§ 20-79.4(b)(64), 20-79.7(a)).
- Plate: Disabled Veteran (100%); a Partially Disabled Veteran plate for a service-connected disability of less than 100% carries no additional special-plate fee but the regular registration fee applies (§§ 20-79.4(b)(190), 20-79.7(a1)).
- The statutes read do not address a surviving spouse keeping the free plate.
Sources
Each source was read on October 28, 2026 on the state’s own site, the normal way. The numbers in the sections above point here.
- Form D-401, North Carolina Individual Income Tax Instructions (tax year 2025)
- § 105-153.5. Modifications to adjusted gross income.
- Form D-401, North Carolina Individual Income Tax Instructions (tax year 2025) (Schedule S, line 21)
- § 105-277.1C. Disabled veteran property tax homestead exclusion.
- AV-9, Application for Property Tax Relief (2027)
- § 20-79.7. Fees for special registration plates and distribution of the fees.
- § 20-79.4. Special registration plates.