Does North Carolina Have Estate Tax?

An estate tax is a levy on the total value of a deceased person’s assets before they are transferred to beneficiaries. This tax is calculated based on the net worth of the estate, which includes property, investments, and other possessions.

North Carolina Estate Tax Status

North Carolina does not impose a state-level estate tax. For residents, this means the total value of their estate is not subject to state tax at the time of death, and the transfer of assets will not trigger a state tax liability.

This has not always been the policy. The state legislature repealed its estate tax in July 2013, making the change retroactive to January 1, 2013. Before this repeal, North Carolina’s estate tax was tied to the federal exemption.

The elimination of the state estate tax means that the size of an estate is no longer a factor for state tax purposes in North Carolina. Whether an estate is modest or valued in the millions of dollars, no state estate tax return needs to be filed, and no tax is owed to the state. This change has aligned North Carolina with the majority of states that do not levy a separate estate tax.

North Carolina Inheritance Tax

An inheritance tax is different from an estate tax, as it is paid by the individuals who receive assets from an estate, not the estate itself. The rate of this tax can sometimes depend on the relationship between the deceased and the inheritor.

North Carolina does not have an inheritance tax. This tax was repealed long before the estate tax was eliminated, so beneficiaries do not owe any state tax on the property they receive.

The absence of both an estate and inheritance tax at the state level streamlines the process of wealth transfer. Heirs can receive their inherited property without the concern of a state tax bill diminishing its value. This lack of state-level transfer taxes is a feature of North Carolina’s tax structure.

Federal Estate Tax Applicability

Despite North Carolina not having its own estate tax, residents are still subject to the federal estate tax. This federal tax applies to estates with a significantly high value. The federal government sets a substantial exemption amount, which is the value of assets an individual can pass on without incurring the tax. This exemption is indexed for inflation and changes periodically.

For 2025, the federal estate tax exemption is $13.99 million per individual. An estate is only required to pay federal estate tax on the value of its assets that exceeds this high threshold. For example, an estate valued at $15 million would only owe tax on the amount over $13.99 million. The top federal estate tax rate is 40%.

The taxable estate for federal purposes is comprehensive, including all assets such as real estate, bank accounts, investments, and business interests. Due to the high exemption amount, the vast majority of estates do not owe any federal estate tax. For married couples, the rules allow for “portability,” where a surviving spouse can use any unused portion of the deceased spouse’s exemption, potentially protecting up to $27.98 million from federal estate tax for deaths in 2025.