North Carolina does not levy an estate tax. However, your estate may still be subject to the federal estate tax if the value is high enough. If you think you need help with estate planning or any other financial planning issues, you may want to consider working with a financial advisor. You can find an advisor in your area who meets your specific needs and preferences by using SmartAsset’s financial advisor matching service.
North Carolina Estate Tax
North Carolina is one of 38 states with no estate tax. Prior to 2013, the state did have an estate tax but it was repealed in July 2013. The repeal retroactively applied to all deaths from January 2013 onward.
What Is the Estate Tax?
The estate tax, sometimes referred to as the “death tax,” is a tax levied against the estate of a recently deceased person before the money passes to the designated heirs. There is a federal estate tax and some states also levy a local estate tax. North Carolina is not one of those states.
The estate tax is different from the inheritance tax. Inheritance taxes are levied on heirs after they have received money from the deceased.
North Carolina Inheritance Tax and Gift Tax
There is no inheritance tax in North Carolina. The inheritance tax of another state may come into play for those living in North Carolina who inherit money. If you inherit property in Kentucky, for example, that state’s inheritance tax will apply even if you live in a different state.
There is no gift tax in North Carolina. The federal gift exemption is $16,000 per year per recipient for 2022 and increases to $17,000 per year per per recipient in 2023. Any gifted amount over that threshold to a single person in a single year will count against your lifetime exemption of $12.92 milloin.
Federal Estate Tax
While there isn’t an estate tax in North Carolina, the federal estate tax may still apply. The federal estate tax exemption was $12.06 million for deaths in 2022 and goes up to $12.92 million for deaths in 2023. The exemption is portable for spouses, meaning that with the right legal steps a couple can protect up to $25.84 million upon the death of both spouses.
A full chart of federal estate tax rates is below. The rates range from 18% to 40%.
Here’s an example of how to calculate your federal estate tax burden: Let’s say your estate is worth $15.74 million and you aren’t married. Subtracting the exemption of $12.92 million, leaves you with a taxable estate of $2.82 million. If you consult the table below, you’ll see that you are in the highest bracket. Your base tax payment on the first $1 million is $345,800. You’ll also pay 40% on the remaining $1.82 million, which comes to $728,000. That sum ($728,000), plus the base tax of $345,800, means your total federal estate tax burden is $1,073,800.
FEDERAL ESTATE TAX RATES
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $10,000||$0||18%||$1|
|$10,000 – $20,000||$1,800||20%||$10,000|
|$20,000 – $40,000||$3,800||22%||$20,000|
|$40,000 – $60,000||$8,200||24%||$40,000|
|$60,000 – $80,000||$13,000||26%||$60,000|
|$80,000 – $100,000||$18,200||28%||$80,000|
|$100,000 – $150,000||$23,800||30%||$100,000|
|$150,000 – $250,000||$38,800||32%||$150,000|
|$250,000 – $500,000||$70,800||34%||$250,000|
|$500,000 – $750,000||$155,800||37%||$500,000|
|$750,000 – $1 million||$248,300||39%||$750,000|
|Over $1 million||$345,800||40%||$1 million|
*The taxable estate is the total above the exemption of $12.92 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall North Carolina Tax Picture
North Carolina is moderately tax-friendly for retirees. Social Security is not taxed but other retirement income sources are fully taxed. North Carolina’s income tax is a flat rate of 4.99%. The state adopted a flat income tax rate in 2014. Prior to that, it had a progressive income tax.
The average effective property tax rate in North Carolina is 0.70%. The sales tax in the state ranges from 6.75% to 7.5%, depending on the county. You can use SmartAsset’s North Carolina paycheck calculator to see what your take home pay will be in the Tar Heel State.
Estate Planning Tips
- Estate planning can be complicated, so don’t be afraid to get some help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When planning your estate, you’ll want to know exactly what assets you have, including what’s in your retirement account. If you’re saving for retirement through an employer-sponsored plan, you can use our 401(k) calculator to see how much you can expect to have saved in retirement.
- When writing your will, make sure you pick the right person to be your executor. This person will be responsible for making sure everything gets distributed the way you want, so pick someone who is up to the task.
Photo credit: ©iStock.com/Bet_Noire, SmartAsset, ©iStock.com/AndreyKrav