Updated October 7, 2026. Quick answer: Yes, 4%, unless you opt out. Form NC-4P says “Your payer must withhold a flat 4% from a nonperiodic distribution” unless you choose not to have State income tax withheld, and “Distributions from an IRA that are payable on demand” are treated as nonperiodic.
Drawing a pension? Whether the state withholds tax from it, from its own documents: North Carolina tax withholding on pension payments.
North Carolina withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Yes for a North Carolina resident, unless the payee elects not to have tax withheld |
| Rate or amount | A flat 4% of a nonperiodic distribution; periodic payments are withheld like wages |
| How to start or stop it | Form NC-4P, given to the payer; check the line 1 box for no withholding; the election applies distribution by distribution for nonperiodic payments |
| Direct rollover | Not required on a distribution paid in a direct rollover to an eligible retirement plan, including an IRA |
| Changed for 2026? | No change stated; the form read is dated 10-23 |
What the North Carolina documents say
The Department of Revenue’s Directive PD-00-2 says that if a payee has given a North Carolina address to a pension payer, the payee is presumed to be a resident and the payer must withhold “unless the payee elects not to have tax withheld”. The directive cites G.S. 105-163.1 and G.S. 105-163.2A.
Form NC-4P sets the rate for one-time payments: “Your payer must withhold a flat 4% from a nonperiodic distribution” unless you choose not to. It says an election to skip withholding on a nonperiodic distribution applies on a distribution by distribution basis, and that the payer must tell you each year of your right to choose.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. North Carolina withholds a flat 4% on the one-time distribution: $2,000 (computed as $50,000 times 4%). The form says that if the distribution is an eligible rollover distribution, the recipient cannot elect out of the withholding.
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. North Carolina agrees on the state side: the form says state tax withheld is not required on a “distribution paid in a direct rollover to an eligible retirement plan”, including an IRA.
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, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The form read is dated 10-23 and the directive dates from 2000; the documents read state no change for 2026.
Common mistakes
- Checking the no-withholding box on one distribution and assuming it carries to the next; the form says the election is distribution by distribution.
- Expecting to opt out of the 4% on an eligible rollover distribution paid to you; the form says the recipient cannot.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state withholding on retirement withdrawals, how North Carolina taxes 401(k) and IRA withdrawals, North Carolina retirement taxes, 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 7, 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.