Bailey Exclusion - NC Retiree

[scsiguru]

My wife retired under CSRS and is eligible for the Bailey exclusion here in North Carolina. I'm preparing our NC taxes and I have a question. For the amount of retirement benefits do I use the Gross distribution OR Taxable amount?

[SteamTrain · Accepted solution]

@scsiguru 

You use the Federally-taxable amount  (the box 2a value, or the Federally-taxable amount calculated if box 2a is empty or marked "undetermined).

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Why?:

...........because the NC tax return starts with the Federal AGI......and NC only allows you to deduct what $$ amount was included in the Federal AGI in the first place.

[scsiguru]

Thank you!