My state retirement is taxable on my Federal return but not on my state return - how do I adjust my state taxable income to take out the state retirement income?

    Edit your 1099-R...make sure all of the boxes are correct....the box 13 "NC" needs to be there, and the box 2a $$ should be copied down to box 14.

    Then Continue to the followup questions
    ...on one page is a "Where Is This Distribution From?" that allows you to select from a whole bunch of pension/retirement choices.

    If yours is an NC state retirement source, You would select either;
    1)  "Bailey Settlement...." OR
    2)  "Other NC state or local government..."

    Only the Bailey settlement will exempt all of the NC distribution $$.......but be sure you qualify by being 5yrs vested in the NC retirement program as of 12 Aug 1989.

    Otherwise you have to select #2, and only $4,000 of the distribution is taken out of NC income.
    Again..the "North Carolina Distribution Amount" should be the same as box do not adjust that number yourself.
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