North Carolina retirement credit?

[Jack from Ohio]

Any NC preparers out there.  Did NC remove the tax credit for retirement income for 2014 or is this an omission by ATX?

[jklcpa]

NC individual changes - see first link under additional information. http://www.dor.state.nc.us/incometaxupdates/index.html

[JohnH]

Yes, NC removed the routine $2,000 income exclusion for retirement income ($4,000 for Federal retirees) in 2014. The only retirees who now get to exclude income are those covered under the "Bailey" settlement, and of course taxable Social Security benefits are excludable.

One does have to be careful about those covered under "Bailey". Qualified NC retirees have a notation on their 1099R - not so with qualified Federal retirees.

Edited February 23, 2015 by JohnH

[Jack from Ohio]

Thank You everyone.  I imagine there are many unhappy retirees in NC this tax season.

[JohnH]

The state of NC raised the standard deduction considerably and lowered the marginal rate. They also eliminated personal exemptions, the basic retirement exclusion, and several credits. They claim that this was pretty much a wash for most taxpayers, but I think the jury is still out on that issue. The first couple of retirees I prepared had modest increases in their total NC tax liability. I'm sure there's some social engineering going on here, coupled with typical political smoke & mirrors. But the politicians gets to brag about how they "lowered tax rates". Technically it's true, but more like the thief who robs you with only a knife rather than his knife and gun.

There is one group who got hit very hard. Self-employed people have enjoyed an exclusion of the first $50K of income on their NC return for the past couple of years. That was also taken away, but IMO it was a bit extreme when it was first enacted anyhow.

[Terry D EA]

John is correct here with the NC changes. I also agree that by raising the standard deduction and taking away the other benefits strikes a balance. I have had more client's pay this year that had always got some type of refund in the past. Oh yes and all of my rental property clients are suffering with the elimination of the first 50k for non-passive income.