North Carolina Income Tax Calculator

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: 34.55 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 North Carolina’s estate tax was repealed as part of the 2013 law.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.

North Carolina Income Tax

As mentioned above, North Carolina moved to a flat income tax beginning with tax year 2014. For tax year 2017, 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 the following three expenses: 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 2017 tax year is $8,250 for single filers, $16,500 for joint filers and $13,200 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 or an automobile, 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 effective property taxes (taxes paid as a percentage of market value) of less than 1%, and the state average effective property tax rate is 0.86%. This is below the national average. On average, homeowners in North Carolina pay about $1,345 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, in which Charlotte is located, the effective property tax rate is 1.14%. If you are looking into buying a home in North Carolina or are considering a refinance, our mortgage rates guide is a good place to start to get the important basic information 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 34.55 cents per gallon for both regular and diesel. That adds up to about $290 dollars per year for a person who drives 15,000 miles per year in a vehicle that gets 18 miles per gallon.

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, must pay an excise tax within 48 hours after acquiring the substance. It is unclear how often this tax is paid.

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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.