In 2014, the North Carolina Department of Revenue (DOR) replaced its progressive tax rates with a flat tax rate. With the old system, the tax rate a resident was required to pay increased as the resident’s earned taxable income increased. The higher the income, the higher the tax rate. With the new tax system, North Carolina residents pay one flat tax rate on their taxable income, no matter how much they earned.
If you’re a resident in North Carolina and you own property or you earned income throughout the year, you owe taxes to the state. It’s important to understand the tax rates, due dates, and tax regulations so you can file your tax return properly and on time. This guide provides helpful information on the North Carolina tax system to ensure you know how these tax regulations apply to you.
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North Carolina Income Tax
If you earned income in North Carolina at any time throughout the year, you may be responsible for filing a state income tax return. However, you’re only responsible for paying state income taxes if you earned above a certain taxable income threshold. The minimum income threshold is determined by your filing status.
For state residents, you must file a state income tax return if you earned the following minimum income:
|Tax Filing Status||Federal Gross Income Threshold|
|Married and filing separately (spouse claims itemized deductions)||$0|
|Married and filing separately (spouse doesn’t claim itemized deductions)||$10,000|
|Married and filing jointly||$20,000|
|Widow(er) or surviving spouse||$20,000|
|Head of Household||$15,000|
You can claim a standard deduction for your taxable income, which varies depending on your filing status. The standard deductions in 2020 are as follows:
|Filing Status||Standard Deduction|
|Single or filing separately from a spouse||$10,750|
|Filing jointly, as a widow(er), or surviving spouse||$21,500|
|Head of Household||$16,125|
The current North Carolina income tax rate is 5.25%. To calculate your taxes, multiply your eligible taxable income minus any deductions by 5.25%. If you’re a part-year or nonresident of North Carolina but you earned income in the state that meets any one of these minimum income thresholds, you’re required to file a state return.
North Carolina Sales Tax
In North Carolina, you must pay sales tax on goods and certain services you purchased. There’s a statewide sales tax of 4.75% but counties can impose their own local taxes in addition to this statewide sales tax rate. Some local tax rates include a small transit sales tax as well.
Most counties increase the statewide sales tax rate by 2% to 2.75%. The DOR offers a list of county tax rates online so you can review the sales tax you’ll pay when shopping in different counties within the state. For example, if you shop in Randolph County, you’ll pay a 7% sales tax but if you make a purchase in Columbus County, you’ll only pay 6.75% in sales tax.
Lottery ticket sales are currently exempt from sales tax. However, the state and local sales tax apply to the purchase of any tangible good or property, as well as the following services:
- Laundry and dry cleaning services;
- Prepaid phone services;
- Telecommunications services;
- Admission fees for entertainment activities;
- Maintenance, repair, and installation services;
- Video programming services;
- Service contracts;
- Satellite, digital, audio, or radio services.
If you make a taxable purchase from an out-of-state seller, such as through an online or catalog order, the seller may not charge you sales tax. However, you’re responsible for reporting use tax to the state, which is the same rate as sales tax.
North Carolina Property Tax
In all states, real property owners are responsible for paying property taxes. This is a tax you’re required to pay to your county government to provide funding for local public services, such as schools and transportation. The tax rate you’re required to pay for real estate you own is determined by the county where the property is located. Your district may also charge additional property taxes that are included in your tax bill.
A county assessor evaluates the current market value of your property. Once a property tax rate is determined by the county, this rate is multiplied by a percentage of your property’s value. For example, Durham county charges a 0.7122% property tax rate and the next property assessment will take place in 2023.
Each year, the property taxes you owe may change depending on changes in your property value and your county and district tax rates. The average county property tax rate in North Carolina was 0.81% and property owners paid an average of $975 in property taxes.
North Carolina Estate Tax
Filing Taxes In North Carolina
State income taxes have the same due date as federal income tax returns and must be filed by April 15 each year. If this date falls on a weekend or holiday, taxes are due the next business day. If you filed a federal return and earned some or all of your income in North Carolina, you must file a state return.
To file your income taxes, you can use the DOR website to pre-fill Form NC-40 (Individual Estimated Income Tax). When complete, print the form and mail it to the DOR along with your tax payment, if applicable. Alternatively, you may use the NCfreefile online tax filing system to electronically file your return. When you create an account with the free tax filing system, you can check the status of your return and view your previous returns online.
If you have questions throughout the tax filing process, a tax professional may help. You may also contact the North Carolina DOR by phone or mail with questions. It’s important to understand how to file your taxes, which taxes are applicable to you, and when they’re due. By reviewing the tax regulations in North Carolina, you’ll find the tax return filing process easier to understand.
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