Retirees in Hendersonville NC – AI

Retiring Near Asheville: North Carolina Taxes Explained

Income, Property, Cost Reality (2026)

Thinking about making Western North Carolina your retirement base? The mountains, cultural amenities, and four-season lifestyle are a big part of the appeal — but taxes play a real role in how far your retirement dollars stretch.

North Carolina’s tax structure is often described as moderately retiree-friendly — especially compared with many Northeast and West Coast states — but the details matter. Below is a clear, practical look at what you’ll pay, what you won’t, and how taxes can shape your retirement budget near Asheville.

Related: If you’re still deciding where to land, read Asheville vs. Hendersonville – A Reality Check to see how taxes, healthcare, and daily costs compare north vs. south of the city.

🧮 Income Tax: Flat, Simple, but Not Zero

North Carolina operates on a flat individual income tax, meaning most taxable income is assessed at the same rate regardless of source.

• In 2025, the NC income tax rate is 4.25%
• Under current law, it is scheduled to decline to 3.99% by 2027, according to AARP’s North Carolina tax guide

What’s Taxed — and What’s Not

Social Security
North Carolina does not tax Social Security benefits, a meaningful advantage for retirees relying heavily on this income stream, as outlined by AARP.

Pensions & Retirement Accounts
Most other retirement income — including 401(k), IRA distributions, and private pensions — is taxed at the flat state rate once included in taxable income, per RetirementLiving.com.

Bailey Settlement (Public Pensions)
Certain government pensions may qualify for exemption under the Bailey settlement if service credit was earned before 1989. Eligibility is narrow and must meet North Carolina Department of Revenue criteria outlined in Directive PD-99-1.

Military Retirement
North Carolina fully exempts military retirement pay from state income tax, confirmed by Retire NC.

What This Means for Retirees

The flat-tax structure makes planning predictable, while not taxing Social Security and having no estate or inheritance tax puts North Carolina in a favorable position compared to many high-tax states, according to Kiplinger’s state tax analysis.

🏡 Property Tax: Local, Not Statewide

Unlike income tax, property taxes are set locally, not by the state. Your actual bill depends on:

• Assessed home value
• County and municipal tax rates

Across North Carolina, effective property tax rates typically fall below the national average, often around 0.6%–0.8% of appraised value, per RetirementLiving.com.

For example, a $400,000 home may see annual property taxes of roughly $2,400–$3,200, before exemptions.

Local insight: Property taxes can vary noticeably between Asheville, Hendersonville, and nearby towns like Laurel Park or Mills River.

Senior Property Tax Relief Programs

Homestead Exclusion
Homeowners 65+ who meet income thresholds may exclude a portion of their home’s value from taxation, lowering annual bills.

Circuit Breaker (Tax Deferment)
Lower-income seniors may defer a portion of property taxes until the home is sold or transferred, as explained by LegalClarity.org.

These programs don’t eliminate taxes but can significantly reduce annual cash-flow pressure.

🛍️ Sales Tax: Moderate, with Key Exemptions

North Carolina’s state sales tax is 4.75%, with local additions bringing the total to roughly 6.75%–7.5% in most areas, according to Kiplinger.

• Grocery food is often taxed at a reduced local rate
• Prescription drugs and many medical devices are fully exempt

For retirees, this keeps healthcare-related spending from compounding tax burdens.

📉 How North Carolina Compares

Compared with states retirees often leave — New York, New Jersey, Illinois, California — North Carolina offers:

• No Social Security tax
• No estate or inheritance tax
• Predictable flat income tax
• Below-average property tax rates

However, most retirement account withdrawals remain taxable, a key difference from no-income-tax states, as noted by RaleighRealty.com.

💡 Practical Example: Retiree Couple Near Asheville

Combined with the lack of estate tax, this creates long-term predictability, a major planning benefit for retirees.

🧠 Tax Outlook Through 2026

North Carolina’s income tax rate is scheduled to drop below 4% by 2027, continuing a gradual trend toward lower taxation, per AARP.

While not eliminating income tax entirely, this trajectory benefits retirees planning for multi-decade residency.

🧾 Key Takeaways for Retirees

1. Social Security is not taxed in NC
2. Most other retirement income is taxed, but predictably
3. No estate or inheritance tax simplifies legacy planning
4. Property taxes are local and relatively low, with senior relief options
5. Sales tax exists, but essentials receive favorable treatment

Next read: Pair this with Healthcare Near Asheville: What Retirees Should Know to evaluate cost and care together.