NC vs. SC Taxes: A State Tax Comparison

North Carolina and South Carolina, while neighbors, possess distinctly different tax systems that create varied financial landscapes for their residents. These differences can influence decisions about where to live, work, and retire. Understanding the nuances of each state’s approach to income, sales, property, and other taxes is a significant step for anyone considering a move or simply seeking to understand their own financial obligations.

Individual Income Tax

North Carolina employs a flat-rate individual income tax. For the 2025 tax year, this rate is set at 4.5%. This represents a continuation of a gradual decrease from previous years, with the rate scheduled to fall to 3.99% in 2026.

In contrast, South Carolina utilizes a progressive income tax system. For the 2025 tax year, the rates are 0%, 3%, and 5.7%. The top marginal rate of 5.7% applies to taxable income over a certain threshold.

For 2025, North Carolina offers a standard deduction of $25,500 for those married filing jointly. This deduction reduces the amount of income that is subject to tax.

Both North Carolina and South Carolina fully exempt Social Security retirement benefits from state income tax. When it comes to distributions from 401(k)s, IRAs, and pensions, North Carolina taxes this income at its flat rate. South Carolina, however, offers specific deductions for retirement income that can substantially lower or eliminate the tax liability for many retirees.

To illustrate, consider a married couple filing jointly with $100,000 in taxable income. In North Carolina, their tax would be a straightforward calculation based on the 4.5% flat rate. In South Carolina, their income would be subject to the tiered bracket system, with different portions of their income taxed at 0%, 3%, and the top marginal rate, potentially resulting in a different overall tax burden.

Sales and Use Tax

North Carolina has a state-level sales tax of 4.75%. South Carolina’s statewide rate is higher at 6%. These base rates do not represent the full amount consumers pay at the register, as local jurisdictions in both states add their own sales taxes.

In North Carolina, counties levy their own sales taxes, which, when combined with the state rate, result in a total rate between 6.75% and 7.50%. South Carolina also has local option sales taxes, and the average combined state and local rate is approximately 7.50%.

South Carolina fully exempts unprepared food items from its 6% state sales tax, although local taxes may still apply. North Carolina, on the other hand, exempts groceries from its statewide sales tax, but it allows local governments to levy their own tax on food, which is typically 2%. Both states exempt prescription drugs from sales tax.

In both North Carolina and South Carolina, most services are not subject to sales tax. However, each state has specific exceptions. For instance, certain repair and installation services may be taxable in one state but not the other. A use tax, which is equivalent to the sales tax rate, applies in both states for out-of-state purchases where no or a lower sales tax was paid.

Real Estate Property Tax

North Carolina assesses property at 100% of its fair market value. This assessed value is then multiplied by the local tax rate, known as the millage rate, to determine the annual property tax.

South Carolina uses a system based on assessment ratios. A primary residence is assessed at just 4% of its fair market value, while second homes and other real property are assessed at a higher 6% ratio. This lower assessment ratio for primary residences provides a tax advantage to full-time residents. The resulting assessed value is then multiplied by the local millage rate.

The term “millage rate” refers to the tax rate applied to the assessed value of a property, where one mill is equal to one-tenth of a cent ($0.001). These rates are set by local governments like counties, cities, and school districts to fund public services. Because of the different assessment methods, a direct comparison of millage rates between the states can be misleading.

A more effective comparison is the average effective tax rate, which is the average amount of residential property tax paid as a percentage of the home’s value. South Carolina has one of the lowest average effective property tax rates in the nation, at around 0.57%. North Carolina’s average effective rate is higher, at around 0.82%.

Both states offer homestead exemptions, which can reduce property tax burdens for older or disabled residents. In South Carolina, eligible homeowners can receive a complete exemption from property taxes levied for school operating purposes on the first $50,000 of their home’s fair market value. North Carolina offers a homestead exemption that allows qualifying low-income seniors and disabled homeowners to exclude a portion of their home’s value from taxation.

Other Key State and Local Taxes

South Carolina levies an annual property tax on motor vehicles, which must be paid before a license plate can be issued or renewed. This tax is calculated based on the vehicle’s fair market value, multiplied by an assessment ratio (6% for most personal vehicles) and the local millage rate. For example, a vehicle with a fair market value of $20,000 in a South Carolina county with a millage rate of 300 mills would result in an annual vehicle property tax of $360.

North Carolina does not have a separate, statewide vehicle property tax system. Instead, vehicles are considered personal property and are subject to local property taxes. This tax is collected along with the annual vehicle registration renewal through the state’s “Tag & Tax Together” program. The resulting tax is generally lower than what is typical in South Carolina.

Gasoline taxes also differ. In North Carolina, the total state excise tax on gasoline is approximately 42.4 cents per gallon. South Carolina’s gasoline tax is lower, at 28.75 cents per gallon.

Neither North Carolina nor South Carolina imposes an estate or inheritance tax. However, the federal estate tax may still apply to very large estates that exceed the federal exemption amount, which for 2025 is $13.61 million per individual.