Updated October 16, 2026. Quick answer: Yes, unless you opt out. North Carolina requires a pension payer that must withhold federal tax to also withhold state tax from a resident, and Form NC-4P lets the payee opt out.
North Carolina pension withholding at a glance
| Item | What the documents say |
|---|---|
| Is state withholding required on regular pension payments? | Yes, unless you elect on Form NC-4P not to have tax withheld. The 2000 directive lets a payer tell recipients whose annual payments are under $5,400 that nothing is withheld unless they choose it, and it excepts Bailey/Emory/Patton settlement retirement benefits paid to retirees vested as of August 12, 1989 |
| Default rate if you give the payer no form | With no NC-4P, the 2023 form says periodic payments are withheld as single with no allowances (an older directive says married with three allowances) |
| Lump sum or one-time payment | A nonperiodic distribution is withheld at a flat 4% unless you opt out; an eligible rollover distribution cannot be opted out of, except a direct rollover |
| Form to start, change or stop it | Form NC-4P (Web 10-23), given to the payer |
| Changed for 2026? | No change stated |
What the North Carolina documents say
North Carolina’s Department of Revenue says the payer must withhold unless the payee elects not to have tax withheld. On the form you check line 1 for no state withholding, or give a filing status, allowances on line 2 and an additional amount on line 3.
For one-time payments the Department says “Your payer must withhold a flat 4% from a nonperiodic distribution”. The 2000 directive puts it as “four percent (4%) of the distribution must be withheld”. An eligible rollover distribution cannot be opted out of, except a direct rollover.
For periodic payments the form says “your Form NC-4P stays in effect until you change or revoke it”. For nonperiodic distributions it says the election applies on a distribution by distribution basis. To revoke a no-withholding choice you file another NC-4P marked Revoked. The authority cited is G.S. 105-163.2A.
What the printed rate means in dollars
For a $50,000 nonperiodic distribution with no opt-out: 4% of $50,000 is $2,000 (computed as $50,000 times 4%).
These are illustrations of the rate the state document prints, not a prediction of how your payer will calculate or what you will owe at filing.
What a mover should know
This page is about North Carolina as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, state tax withholding on IRA and 401(k) withdrawals in North Carolina covers the account side, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The two documents differ on the default for periodic payments, so ask the payer which it uses: the 2023 Form NC-4P says single with no allowances, while the 2000 Directive PD-00-2 says to “withhold as if the recipient were a married person with three allowances”. The form is the later document.
Common mistakes
- Giving the payer a federal W-4P and assuming it also settles the state; check whether the state’s own form is needed.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state tax withholding on IRA and 401(k) withdrawals in North Carolina, North Carolina retirement taxes, whether North Carolina taxes pensions, state withholding on retirement withdrawals, and retirement withholding calculator.
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Answer againSources
- Form NC-4P Withholding Allowance Certificate for Pension or Annuity Payments (10-23): https://ncdor.gov/tax-forms/nc-4p-withholding-allowance-certificate-pension-or-annuity-payments/open
- Directive PD-00-2 Withholding of North Carolina Income Tax from Pensions, Annuities, and Deferred Compensation: https://www.ncdor.gov/taxes-forms/individual-income-tax/personal-taxes-division-directives/directive-pd-00-2
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.