If you had 5 years of active service as of August 12, 1989, your military retirement is exempt from NC tax. If not, it is fully taxable.
From the NC DOR website:
North Carolina may not tax certain retirement benefits received by retirees (or by beneficiaries of retirees) of the State of North Carolina and its local governments or by United States government retirees (including military).
The exclusion applies to retirement benefits received from certain defined benefit plans, if the retiree had five or more years of creditable service as of August 12, 1989.
NC does not tax SS benefits.
From NC DOR website: If your social security or railroad retirement benefits were taxed on your federal return, you may take a deduction for those benefits on your North Carolina individual income tax return. You may take this deduction because this income has already been included as part of your federal adjusted gross income and North Carolina does not tax this income. This deduction will increase your refund or decrease the amount you must pay.
