Interest Income from U.S. Obligations

You may take a deduction on your North Carolina individual income tax return for interest you received from direct United States obligations to the extent this interest has already been included in your federal adjusted gross income. The State does not tax this income; therefore, this deduction will reduce your North Carolina taxable income.

You may take a deduction for interest received from notes, bonds, and other direct United States obligations such as savings bonds and treasury notes and bills.

You cannot deduct interest earned from federally backed or guaranteed obligations such as Sallie Maes, Ginnie Maes, Fannie Maes, and Freddie Macs. These do not qualify for this deduction since they are not binding promises to pay by the United States government. You cannot deduct distributions from United States obligations representing gain from the sale or other disposition of the securities, or interest paid in connection with repurchase agreements issued by banks and savings and loan associations. This deduction does not apply to any portion of a distribution from an Individual Retirement Account (IRA).

Enter your deduction amount on line 41 of Form D-400. This amount will become part of the amount on line 9 of page 1 of your Form D-400.