How Much Does NC Take Out for Taxes?

North Carolina’s tax structure generates revenue to fund public services. Residents and visitors contribute through taxes on income, purchases, and property ownership. Understanding these components provides clarity on how financial contributions are collected within the state.

North Carolina Individual Income Tax

North Carolina levies a flat individual income tax rate on taxable income. For the 2024 tax year, this rate is 4.50%. This flat rate applies to income after accounting for applicable deductions and exemptions.

Income subject to North Carolina individual income tax generally includes wages, salaries, business income, interest, dividends, and capital gains. Taxpayers calculate their taxable income by subtracting eligible deductions from their gross income.

Taxpayers can reduce their taxable income by claiming either a standard deduction or itemized deductions. For the 2024 tax year, the standard deduction amounts are $12,750 for single filers and married individuals filing separately, $25,500 for married couples filing jointly, and $19,125 for heads of household. North Carolina does not offer a personal exemption for filers, spouses, or dependents.

Individuals who itemize deductions may claim charitable contributions, mortgage interest, and property taxes. However, the deduction for mortgage interest and property taxes is capped at $20,000.

Some taxpayers are required to make estimated income tax payments throughout the year. This requirement applies if the tax expected to be due on an individual’s return, after subtracting North Carolina tax withheld and allowable tax credits, is $1,000 or more.

Estimated tax payments are typically due in four installments. For most calendar year filers, these payments are due on April 15, June 15, September 15 of the taxable year, and January 15 of the following year. Underpayment of estimated taxes can result in interest penalties.

North Carolina Sales and Use Tax

North Carolina imposes a sales tax on the retail sale of tangible personal property and certain services. The statewide sales tax rate is 4.75%. This state rate is applied to most taxable purchases made within North Carolina.

In addition to the statewide rate, local sales tax rates are added, varying by county. These local rates typically range from 0% to 2.75%, leading to a combined state and local sales tax rate that can range from 4.75% to 7.50%. The average combined state and local sales tax rate in North Carolina is around 7.00%.

The sales tax applies to a wide array of goods, including most tangible personal property. While services are generally not subject to sales tax, there are specific exceptions. For instance, prepared food may be subject to a higher sales tax rate, such as 9%, compared to the reduced rate for qualifying unprepared food items like most groceries.

North Carolina also has a “use tax,” which applies when items are purchased inside or outside the state for storage, use, or consumption in North Carolina, and the applicable sales tax was not collected at the time of purchase. This often occurs with online purchases from out-of-state retailers who are not obligated to collect North Carolina sales tax. The use tax rate is the same as the sales tax rate that would have been applied had the purchase been made in North Carolina.

Certain items are exempt from sales and use tax, including prescription drugs and most medical devices. Qualifying food items, defined as unprepared groceries, are subject to a reduced state sales tax rate of 2%, rather than the general rate. However, items like candy and soft drinks are not considered qualifying food and are taxed at the general sales tax rate.

North Carolina Property Tax

Property taxes in North Carolina are levied at the local level by counties and municipalities, rather than by the state government. This means rates vary significantly by county and city. The average effective property tax rate on owner-occupied housing value in North Carolina is approximately 0.63% to 0.70%.

The amount of property tax owed is determined by the property’s assessed value and the local tax rate. Properties are appraised at 100% of their fair market value. North Carolina law mandates that counties conduct a reappraisal of real property at least once every eight years to ensure assessed values reflect current market conditions.

Local tax rates are typically expressed per $100 of assessed value. To calculate the annual property tax bill, the assessed value of the property is divided by 100, and then multiplied by the combined tax rate set by the county, city, and any other special taxing districts. Property tax revenues are a primary source of funding for local public services, including schools, public safety, and infrastructure projects.

North Carolina offers certain property tax exclusions and deferrals for qualifying homeowners. For example, an “Elderly or Disabled Homestead Exclusion” is available for residents aged 65 or older, or those who are totally and permanently disabled, provided their income does not exceed a specified limit. This exclusion removes the greater of $25,000 or 50% of the appraised value of the permanent residence from taxation. Additionally, honorably discharged disabled veterans may qualify for an exclusion of $45,000 from their home’s appraised value.

Other Common North Carolina Taxes

Beyond income, sales, and property taxes, North Carolina residents encounter several other taxes that contribute to state and local revenues.

Motor vehicle property tax is assessed annually by counties based on the vehicle’s value. This tax is typically collected at the time of vehicle registration renewal. The amount varies depending on the vehicle’s assessed value and the local tax rates.

Excise taxes are imposed on certain goods and are generally included in the purchase price. North Carolina levies an excise tax on gasoline, which is 40.65 cents per gallon. There is also an excise tax on tobacco products, with cigarettes taxed at 45 cents per pack of 20. Other tobacco products are taxed at 12.8% of the wholesale price. Alcoholic beverages also carry excise taxes, such as $12.30 per gallon for liquor.

Some businesses and professionals in North Carolina may also be subject to privilege license taxes. These are annual taxes paid to the state for the privilege of conducting certain business activities.