Overview of North Carolina Taxes
North Carolina now has a flat state income tax rate of 5.499%. The average effective property tax rate for the state is below the national average. There is a statewide sales tax and each county levies an additional tax. Retired? Use our Retirement Income Tax Calculator.
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Your Income Taxes Breakdown
| Tax Type | Marginal Tax Rate | Effective Tax Rate | 2018 Taxes* |
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* These are the taxes owed for the 2018 - 2019 filing season.
Changes to Your Federal Income
Taxes Under the 2018 Tax Reform
- Your marginal federal income tax rate
- Your effective federal income tax rate
- Your federal income taxes
Total Estimated 2018 Tax BurdenIncome Tax $ Sales Tax $ Fuel Tax $ Property Tax$ Total Estimated Tax Burden $ Percent of income to taxes = % | $ |
- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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Taxes in North Carolina
North Carolina State Tax Quick Facts
- Income tax: 5.499%, flat rate
- Sales tax: 6.75% - 7.5%
- Property tax: 0.86% average effective rate
- Gas tax: 35.35 cents per gallon both of regular gasoline and diesel
In 2013 the North Carolina Tax Simplification and Reduction Act radically changed the state’s tax structure. Previously, North Carolina had a progressive income tax, with rates ranging from 6% to 7.75%. The new law introduced a flat rate income tax and more than doubled the standard deduction for North Carolina taxpayers. The effect was a significant overall reduction in taxes for taxpayers of all income levels.
Along with the state income tax, other taxes paid by North Carolinians include sales taxes (to both state and local authorities), property taxes and the gas tax. North Carolina’s estate tax was repealed as part of the 2013 law. Read on for the specifics of all these taxes and how they might affect you.
A financial advisor in North Carolina can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
North Carolina Income Taxes
North Carolina moved to a flat income tax beginning with tax year 2014. For tax year 2018, all taxpayers pay a flat rate of 5.499%. That rate applies to taxable income, which is income minus all qualifying deductions and exemptions, as well as any contributions to a retirement plan like a 401(k) or an IRA.
In North Carolina, taxpayers can claim itemized deductions for charitable contributions, mortgage interest and property taxes. The deductions for the latter two categories cannot exceed $20,000. Most other deductions that were previously available in North Carolina, including the Net Business Income deduction and the College Savings Program deduction, are no longer available.
Taxpayers who don’t itemize their deductions can claim North Carolina’s standard deduction. The standard deduction for the 2018 tax year is $8,750 for single filers, $17,500 for joint filers and $14,000 for heads of household. However, there is no personal exemption in North Carolina for filers, spouses or dependents. To file your federal tax return, you can look into tax preparation software or hire a professional accountant.
North Carolina Sales Tax
The base sales tax in North Carolina is 4.75%. In addition to that statewide rate, every county in North Carolina collects a separate sales tax, which ranges from 2% to 2.25%. In Durham and Orange counties, there is an additional 0.5% tax which is used to fund the Research Triangle Regional Public Transportation Authority. In sum, that means sales tax rates in North Carolina range from 6.75% to 7.5%. Below are the sales tax rates for all the counties in North Carolina.
Those rates apply to most products in the state as well as some services, including the repair of tangible personal property (including automobiles), laundry service and admissions to entertainment events (e.g. movie tickets). Most types of food are subject to a lower tax rate of 2%. Aircraft and boats also face a lower rate of 3% of the purchase price, or $1,500 total, whichever is lower.
North Carolina Property Tax
Many counties in North Carolina collect property taxes at an effective rate (taxes paid as a percentage of home value) of less than 1%, making the state average effective property tax rate 0.86%. This is below the national average. On average, homeowners in North Carolina pay about $1,378 annually in property taxes, just over $100 per month. In general, however, rates are higher in North Carolina’s largest cities. For example, in Mecklenburg County, which includes Charlotte, the effective property tax rate is 1.11%. If you are looking into buying a home in North Carolina or are considering refinancing, our mortgage rates guide has all the information you need about getting a mortgage in the Tar Heel State.
North Carolina Capital Gains Tax
In North Carolina, both long- and short-term capital gains are treated as regular income, and taxed at the 5.499% flat income tax rate.
North Carolina Gas Tax
North Carolina’s statewide gas tax is 35.35 cents per gallon for both regular and diesel. For reference, if you drive 15,000 miles per year in a vehicle that gets 18 miles per gallon, your total gas tax would add up to about $290 per year.
North Carolina Estate Tax
As of January 1, 2014 North Carolina has no estate tax.
North Carolina Unauthorized Substances Tax
According to North Carolina law, anyone who “possesses an unauthorized substance,” including marijuana, cocaine, moonshine, mash and illicit mixed beverages, will have the substances confiscated and must then pay an excise tax within 48 hours.
- While the etymology of North Carolina’s nickname, the Tar Heel State, is unknown, it likely has to do with the tar that was harvested from North Carolina’s pine forests in its early history.
- Basketball legend Michael Jordan is from Wilmington, North Carolina, where he was famously cut from the varsity basketball team at Emsley A. Laney High School as a sophomore.
Places with the Lowest Tax Burden
Are you curious how your tax burden stacks up against others in your state? SmartAsset’s interactive map highlights the counties with the lowest tax burden. Scroll over any county in the state to learn about taxes in that specific area.
Methodology
Where you live can have a big impact on both which types of taxes you have to pay each year and how much money you spend on them. SmartAsset calculated the amount of money a specific person would pay in income, sales, property and fuel taxes in each county in the country and ranked the lowest to highest tax burden.
To better compare income tax burdens across counties, we used the national median household income. We then applied relevant deductions and exemptions before calculating federal, state and local income taxes.
In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a county by the household income less income tax. This product is then multiplied by 35% to estimate the sales tax paid.
For property taxes, we compared the median property taxes paid in each county.
For fuel taxes, we first distributed statewide vehicle miles traveled down to the county level using the number of vehicles in each county. We then calculated the total number of licensed drivers within each county. The countywide miles were then distributed amongst the licensed drivers in the county, which gave us the miles driven per licensed driver. Using the nationwide average fuel economy, we calculated the average gallons of gas used per driver in each county and multiplied that by the fuel tax.
We then added the dollar amount for income, sales, property and fuel taxes to calculate a total tax burden. Finally, we created the Tax Burden Index in order to show how each county in the country compares to the county with the lowest tax burden (that is the county with a Tax Burden Index of 100).
Sources: US Census Bureau 2017 American Community Survey, Government Sources, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration, SmartAsset
