Side-by-side for American retirees in 2026.
Cheapest of the major southern retirement states. Social Security, government pensions, and most defined-benefit pensions fully exempt — plus rock-bottom property taxes.
Four-season retirement with mountains, coast, and the Research Triangle. Flat income tax, no Social Security tax, and exceptional healthcare from Duke and UNC.
| Progressive, top 5% | Income tax | Flat 4.25% |
| Exempt | Social Security | Exempt |
| Defined-benefit pensions + SS exempt; partial exemption for IRA/401k at 65+ | Pension treatment | Flat 4.25% in 2025, scheduled to step down further on the NC phase-down; Social Security fully exempt |
| 0.40% | Property tax (effective) | 0.73% |
| 9.29% | Avg combined sales tax | 6.99% |
| 88.1 | Cost of living (US=100) | 95.3 |
| None | Estate / inheritance tax | None |
| Hot humid summers, mild winters. Gulf Coast (Mobile, Gulf Shores) has Florida-like climate. | Climate | Four distinct seasons. Mild winters in the Piedmont; cooler in the mountains; warm humid summers statewide. |
| Mixed — strong in Birmingham (UAB), weaker in many smaller cities. Best to retire near a major medical center. | Healthcare | Excellent — Duke Health, UNC Health, Atrium Health. Research Triangle has world-class care. |
| Fairhope, Huntsville, Auburn | Top retirement cities | Asheville, Wilmington, Pinehurst |
Homestead exemption + age 65+ full state property tax exemption on principal residence
Elderly/disabled homestead exclusion: $25K or 50% of value (whichever greater) for income under ~$36K
Alabama: Cheapest of the major southern retirement states. Social Security, government pensions, and most defined-benefit pensions fully exempt — plus rock-bottom property taxes. North Carolina: Four-season retirement with mountains, coast, and the Research Triangle. Flat income tax, no Social Security tax, and exceptional healthcare from Duke and UNC. The right choice depends on your income mix, climate preference, and whether state income tax matters more to you than property tax.
No, Alabama does not tax Social Security retirement benefits.
No, North Carolina does not tax Social Security retirement benefits.
Alabama's cost of living index is 88.1 (US = 100). North Carolina's is 95.3. Alabama is cheaper on average.
Enter your retirement income and see the after-tax difference between Alabama and North Carolina in 30 seconds.
Open tax estimator →Tax data current as of 2026 publication. Rates and rules change annually — verify with a CPA before relocating. This page is educational and not personalized tax or legal advice.