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AARP AARP States North Carolina Finances 50+

Concern Grows Over Tax Impact

Douglas Sherrow, with grandchildren Grayson (left) and Ariah (right), at home in Mint Hill. Photo by Logan Cyrus.

By Michelle Crouch

Douglas Sherrow, a severely disabled Army veteran in Mint Hill, struggles to make ends meet on his military pension and Social Security. He and his wife are raising two grandchildren, and he said they’ve racked up thousands in credit card debt over four years.

“I’ve never been in the hole this far,” said Sherrow, who has multiple sclerosis and uses a walker. “Taxes keep going up, and my ability to pay them is going down.”

Sherrow, 69, moved from Long Island in 2008. He’s worried about rising property taxes making it difficult for older residents on fixed incomes.

Higher assessments are affecting all homeowners. Meanwhile, financial analysts say neighboring states offer greater tax relief for older residents.

Doug Dickerson, AARP state director, said North Carolina is losing ground to nearby states in luring retirees to move here because the cost of living is too high.

“Boomers are still the muscle behind much of the spending in our economy,” Dickerson said. “Don’t we want those boomers moving here?”

Kiplinger’s most recent state guide to taxes on retirees ranks North Carolina as having a “mixed tax picture.” South Carolina is ranked as “tax-friendly,” while Georgia and Tennessee were rated “most tax-friendly.”

Income disparity
The AARP Public Policy Institute found that the average income of residents 65 and older in North Carolina ($32,934) is below that of those three neighboring states.

Dickerson said tax reform would help older adults who already live here, while also making the state more attractive to retirees who could bring money and new life to rural communities. He hopes the General Assembly will consider changes next year.

James Johnson, a professor at the University of North Carolina’s Kenan-Flagler Business School in Chapel Hill, agrees that the cost of living is a big factor, but not the only one.

“Retirees are also evaluating amenities, proximity to the beach and the mountains, and they often want to stay close to family and to health care facilities,” he said.

North Carolina offers several tax breaks for older residents. Social Security benefits are not taxed, and there is no estate tax. There is a homestead exclusion on property tax for those 65 and older, subject to income restrictions, and another exclusion for some disabled veterans.

But other Southern states offer more tax relief. In South Carolina, not only are Social Security benefits exempt from income tax, but residents can deduct another $15,000 of income from any source starting at age 65.

Homeowners 65 or older in South Carolina are exempt from property tax on the first $50,000 of assessed value of their home.

The state will also allow veterans over 65 to deduct the first $30,000 of military retirement pay from their taxes by 2020.

In North Carolina, the Senate approved a bill in June that would have exempted military pensions from income taxes, but it didn’t pass the House.

Sherrow, a retired lieutenant general who served in Vietnam, said the exemption would have been a big help. He hopes legislators will take it up again next year.

“The legislature needs to keep looking at how they are raising income,” he said. “Seniors who aren’t working are paying more than their share of the burden. It’s left me and my family living from check to check.”

Michelle Crouch is a writer living in Charlotte.

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