Ask June > , > Move to North Carolina not a taxing proposition

Move to North Carolina not a taxing proposition

January 15, 2013 • J.J. Montanaro

Q: I retired from the army in 1086 in Kansas and moved to N.C. How is my retire­ment taxed…Total minus dis­abil­ity? I read and hear so many things now. What is this Bai­ley law­suit and what would that have to do with mil­i­tary retirement?

–Doyle, Vass, North Carolina

A: Well, if you retired in 1086, all I can say is: job well done! You have clearly max­i­mized the income received through your mil­i­tary retire­ment (although I’m not sure what mil­i­tary you retired from?). All kid­ding aside, your move from Kansas to North Car­olina should not change the tax­a­tion of your mil­i­tary retire­ment. In Kansas, mil­i­tary retire­ment is exempt from state income tax and, thanks to the Bai­ley case, you’ll get the same treat­ment in North Carolina.

Now let’s move to the his­tory les­son. Back in 1989 the US Supreme Court ruled that Fed­eral retirees could not be taxed dif­fer­ently than State retirees in the Davis v. Michi­gan Depart­ment of Trea­sury case. Fol­low­ing that rul­ing, the North Car­olina leg­is­la­ture repealed the state employ­ees’ retire­ment tax exemp­tion.  How­ever, in the Bai­ley vs. State of North Car­olina case you men­tioned the North Car­olina Supreme Court ruled that those state retirees (and by virtue of the Davis case, fed­eral and mil­i­tary retirees) who were vested in the retire­ment plan as of 8/12/89 could not be taxed. So, since you retired in 1986, your mil­i­tary retire­ment will not be taxed by North Car­olina. Enjoy the golf!

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