NC Preparers- Bailey case question

[BCinSC]

Am I correct that military retirement (all service prior to 1989) is totally excludable from NC taxable income? I am not clear about the $4000 exclusion vs total exclusion. Thanks in advance for clarifying this for me.

[JohnH]

The key is whether the retiree was vested before Aug 12, 1989.

If so, then the entire pension is excludable.

They are considered vested if they had 5 or mer years of creditable service prior to Aug 12, 1989, so that means creditable service must have begun before Aug 12, 1984.

http://www.dor.state.nc.us/taxes/individual/benefits.html

The $4,000 exlcusion applies to State and Federal employees who don't meet the Aug 12, 1989 test under Bailey.