State Tax Relief for U.S. Troops Serving in a Combat Zone

North Carolina follows the provisions of Internal Revenue Code sections 112 and 7508 as they relate to members of the United States Armed Forces serving in a designated combat zone. A combat zone is any area the President of the United States designates by Executive Order as an area in which the United States Armed Forces are engaging or have engaged in combat. For federal tax information relating to the Armed Forces, please visit the Internal Revenue Service website at http://www.irs.gov/individuals/military/index.html.

Extensions of Deadlines

  • For members of the Armed Forces and support personnel serving in a combat zone, and their spouses, the deadline for filing tax returns, paying taxes, filing claims for refunds, and taking other actions with the Department of Revenue is automatically extended until at least 180 days after the member leaves the combat zone or is dismissed from a qualified hospitalization resulting from wounds, diseases, or injury incurred while serving in the combat zone.
  • Penalties and interest will not be charged during the extension period.

Combat Zone Pay

  • For enlisted personnel, warrant officers, and commissioned warrant officers serving in a combat zone or hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone during any part of a month, all military pay for that month is excluded from gross income.
  • For commissioned officers (other than commissioned warrant officers) serving in a combat zone or hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone during any part of a month, the amount of military pay that is excluded from gross income for that month is limited to the highest rate of enlisted pay plus imminent danger/hostile fire pay.

If you are covered by these relief provisions because of serving in a designated combat zone, write in black at the top right of your State return the designation appropriate to the combat zone in which you served -- for example, "Iraqi Freedom" for the Iraq combat zone or "Enduring Freedom" for the Afghanistan combat zone, etc. You must include a statement with the return when it is filed indicating the dates you were in the combat zone. If you receive a notice from the Department of Revenue regarding a collection or examination matter, return the notice to the Department with the appropriate designation written at the top of the notice and on the envelope so that any action can be suspended. If you need assistance, please contact one of our U.S. toll-free or international tax assistance numbers or you may contact a service center for assistance.

Armed Forces Personnel Killed in Action

  • The State tax liability is forgiven for an individual who (1) is a member of the U. S. Armed Forces at death, and (2) dies while in active service in a combat zone, or at any place from wounds, disease, or injury incurred while in active service in a combat zone. If you are filing a return for such a decedent, write "KIA" for killed in action and the applicable combat zone designation in black ink at the top right of the State return (ex: "KIA - Iraq" or "KIA - Afghanistan").
  • An attachment that includes a computation of the decedent's tax liability before any amount is forgiven and the amount that is to be forgiven should accompany any return or claim. A copy of the documentation that was included with the decedent's federal return verifying that the decedent was killed in action should also be included.