Federal Retirees

From page 13 of the NC income tax instructions for form D400,

2b_fers_retired,

Regarding your comment as to whether a "fed employee can qualify for an earlier date for creditable service by buying military time..."

it occurred to me that those retiring under CSRS-Offset could be facing a similar issue as the military person in your example.

As you may know, there are a considerable number of babyboomer women who dropped out of the federal workforce for a few years to raise children & were placed under the CSRS-Offset retirement plan upon their return.

In response to the question you raised about the Bailey Decision,

I want to mention that an H&R Block office that is physically located in North Carolina is probably up-to-speed on the Bailey Decision. My experience with H&R Block is that they are willing to answer one question free-of-charge, even for drop-ins. Semi-Retired2013-05-24 07:16:06

The NC Senate passed a budget (goes to House), stating a tax reform dollar amount, but not the details (to be supplied separately). But it does say this:


Link to article

Doesn't sound like a lot when talking about so many employees/retirees. I grew up in NC.

The way I read it, the $36 million is an INCREASE, not the total contribution to the retirement fund next year.

Retirees eligible for the Bailey Decision exemption are right to follow this. That is one of the reasons for starting this topic. However, from the information I have seen so far... the impact will be limited to the sales tax base broadening.

I have not been able to get information specifically if the Bailey Decision exemption would be impacted. And I wrote to both a NC Senator and House representative that are outspoken on NC Tax Reform. Alas, no response. There is no mention of it in the actual House bill, so I don't believe that bill changes Bailey exemption.

This week the NC Senate released their version of NC tax reform.
In fact, there are two competing Senate plans.
1) Sens. Bob Rucho and Bill Rabon, Senate Bill 677 (correction should be 669)
2) Sens. Dan Clodfelter and Fletcher Hartsell, Senate Bill 394

Link to article

3) And the House Bill 998, previously discussed

Sales Tax

The current state sales tax is 4.75 percent, plus 2 percent (or more) by the local governments. The typcial total sales tax rate is 6.75 percent.

All three plans lower the sales tax rate, but expand the base by applying it to more services.

1) The Rucho plan would raise the state's portion to 5 percent while lowering the local portion to 1.5 percent. The plan expands it to the most services and applies sales tax to prescription drugs, which are not currently taxed. It also raises the tax on groceries from 2 percent to the full 6.5 percent.

2) The Clodfelter plan would lower the state's portion to 4.5 percent, lowering the overall rate to 6.5 percent also. The plan does not change the sales tax on prescriptions or groceries.

3) The House plan would keep the state portion of sales tax at 4.75 percent but would lower the local portion by 0.1 percent. And expands it to the least services. The plan does not change the sales tax on prescriptions or groceries.

Other notes:
The Rucho plan (1) would remove tax exemptions for nonprofits and charities. It also would charge state income tax on Social Security benefits that are subject to federal taxes. That most often occurs when a retiree has multiple sources of income (not just SS).EngineerJim2013-06-03 11:54:08

Thanks for the update. I do wish they would leave it alone!! :-)

House bill 998 was amended by a vote on Tuesday.
It removed the proposed $25,000 cap on deducting mortgage interest and charitable deductions.
It also allows taxpayers to continue deducting their property taxes.

IMO, the $25,000 cap was high enough, but I agree that property taxes should remain as a tax deduction so that was a good change. At today's mortgage rate of 4.0%, that would be a 30 year loan of $650,000.

Here is a link to the NC bill. The amended bill is H998-PCS30566-RBx-25
Link H998 amendedEngineerJim2013-06-05 09:57:03

Are you thinking that if the deduction for property taxes is eliminated that this will partially offset the tax savings available through the Bailey decision?

Since everyone's tax situation is different, it is hard to generalize on the importance of the State property tax deduction.

Leasing a nice townhouse on a golf course might make financial sense in some circumstances.