Updated October 7, 2026. Quick answer: Only if you live there. North Carolina requires a nonresident to file only when the income came from North Carolina sources, as the instructions say: “you received income in 2025 from North Carolina sources”.
State retirement-income forms, line by line: North Carolina Schedule S.
How North Carolina treats a pension earned elsewhere
| Item | What the state documents say |
|---|---|
| Nonresidents | A person who was never a North Carolina resident in 2025 files only if the income came from North Carolina sources, which the instructions list as property in the state, a business, trade, profession or occupation carried on in the state, or gambling in the state. A pension is not among the listed sources. This row rests on the 2025 individual income tax instructions for the D-400 forms. |
| Residents with a pension earned elsewhere | A resident reports total income from all sources. The Schedule S Bailey deduction on Line 20 lets certain vested North Carolina state, local and federal government retirees deduct their retirement benefits. The instructions say the exclusion does not apply to retirement benefits paid to former teachers and state employees of other states. The source says: “North Carolina may not tax certain retirement benefits”. A pension earned in another state is therefore not covered by the Bailey exclusion. |
| Part-year residents (year of a move) | A part-year resident files Form D-400 Schedule PN and must include all income received while a resident of North Carolina, including income from another state received during that period. The taxable percentage from Schedule PN is entered on Form D-400 Line 13. The source says: “A part-year resident must include all income received”. The Schedule PN allocation sets the share of income subject to North Carolina tax. |
| Rate | North Carolina prints a flat individual income tax rate of 4.25% for tax year 2025. The source says: “the individual income tax rate is 4.25%”. North Carolina taxable income is multiplied by that rate. |
| Return to file | Residents file Form D-400, with Schedule S for the Bailey deduction. Part-year residents and nonresidents with North Carolina income file Form D-400 with Schedule PN. The source says: “Form D-400 Schedule PN, 2025 Part-Year Resident”. A nonresident files only if the income came from the three North Carolina sources the instructions list (an interest in real or tangible personal property in the state, a business, trade, profession or occupation carried on in the state, or gambling in the state) and total gross income from all sources, inside and outside North Carolina, exceeds the Filing Requirements Chart amount for the filing status. |
A $40,000 move-year example
A retiree receives $40,000 of pension in the year of a move: $20,000 before the move date, as a North Carolina resident, and $20,000 after leaving.
The first $20,000 can be taxed by North Carolina; the rest is outside its reach under the federal rule below. At the 4.25% rate printed for 2025, the tax on it is computed as $20,000 x 0.0425 = $850, before any exclusion or credit. Federal tax still applies.
The federal rule that protects a nonresident
4 U.S.C. 114(a) bars a state income tax on retirement income of an individual “who is not a resident or domiciliary of such State”. Retirement income means certain plan payments made as a “series of substantially equal periodic payments”, so not every payment is covered.
Related: how North Carolina taxes retirement income, whether North Carolina taxes pensions, California to North Carolina retirement taxes, Colorado to North Carolina retirement taxes, out-of-state pension tax by state, and deferred compensation lump sums after a move.
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Answer againSources
- 2025 North Carolina Individual Income Tax Instructions, Form D-401 booklet (Department of Revenue): https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Government Publishing Office, 2023 edition): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.