North Carolina Income Tax Calculator 2023-2024 Tax Year

North Carolina Tax Details

North Carolina employs a flat income tax rate, making its tax system relatively straightforward. In addition to income taxes, the state imposes sales, property, excise, corporate, and various other taxes. Understanding North Carolina's tax structure is essential for both residents and businesses operating within the Tar Heel State.

Taxes in North Carolina: An In-Depth Overview

North Carolina's tax system includes income, sales, property, excise, and corporate taxes, which collectively contribute to the state's revenue. The flat income tax structure, coupled with moderate sales and property taxes, makes North Carolina's tax environment unique. This comprehensive guide explores the various tax components in North Carolina, supported by the latest statistics and facts up to October 2023.

North Carolina State Tax Quick Facts

• Income Tax: 4.75% flat rate (scheduled to decrease to 4.99% in 2024)
• Corporate Income Tax: 4.75% flat rate
• Sales Tax: 4.75% base rate (local rates can increase total to up to 7.5%)
• Property Tax: Approximately 0.85% average effective rate
• Gas Tax: 35 cents per gallon of regular gasoline, 35 cents per gallon of diesel
• Estate Tax: North Carolina does not impose a state estate tax or inheritance tax
• Total Tax Revenue: Over $20 billion annually
• Number of Taxpayers: Approximately 4 million individual taxpayers

North Carolina Income Taxes

North Carolina utilizes a flat income tax system, meaning all taxable income is taxed at the same rate regardless of income level. As of 2023, the state income tax rate is 4.75%, scheduled to decrease to 4.99% in 2024.

In the 2023 fiscal year, North Carolina's income tax revenue amounted to approximately $9.5 billion, accounting for around 47.5% of the state's total tax revenue. With over 4 million individual taxpayers, North Carolina maintains a robust tax base.

The flat tax structure ensures simplicity and predictability in tax calculations, benefiting both taxpayers and the state's administrative processes. This system also promotes economic equity by treating all income levels uniformly.

Income Tax Rate:

Taxable Income	Tax Rate
All taxable income	4.75% (4.99% in 2024)

Tax Credits and Deductions

North Carolina offers several tax credits and deductions, including:

• Earned Income Tax Credit (EITC): Available to low to moderate-income working individuals and families, providing a refundable credit based on income and number of dependents.
• Child and Dependent Care Credit: Provides a credit for expenses related to the care of dependents while the taxpayer is employed or seeking employment.
• Education Expense Deductions: Deductions for qualified education expenses, including tuition and related costs.
• Renewable Energy Tax Credits: Credits for investments in renewable energy projects and equipment, such as solar panel installations.
• Historic Preservation Tax Credits: Incentives for the restoration of historic buildings, providing up to 25% of eligible rehabilitation expenses.
• Adoption Credit: Up to $6,000 per eligible child to offset adoption-related expenses.

These credits and deductions can significantly lower your taxable income or the amount of tax owed. Businesses benefit from credits that encourage investment, job creation, and environmental sustainability. It's advisable to consult a tax professional or the North Carolina Department of Revenue for detailed information and eligibility requirements.

North Carolina Sales Tax

The base sales tax rate in North Carolina is 4.75%, which applies to most goods and certain services. Local jurisdictions—such as cities and counties—can impose additional sales taxes, bringing the total sales tax rate up to 7.5% in some areas.

Sales tax is a significant source of revenue for the state, funding education, infrastructure, public safety, and other essential services. Businesses must navigate varying local tax rates, which can add complexity to tax compliance and pricing strategies.

Sales Tax Rates by Municipality (Selected Cities):

City/County	Combined Sales Tax Rate
Charlotte	7.25%
Raleigh	6.75%
Durham	6.75%
Greensboro	6.75%
Winston-Salem	7.50%
Asheville	6.75%
High Point	6.75%
Fayetteville	6.75%
Cary	6.75%
Gastonia	7.25%

Exemptions

• Groceries: Most unprepared food items are exempt from sales and excise taxes.
• Prescription Medicine: Exempt from sales and excise taxes.
• Medical Devices: Certain medical devices are exempt from sales and excise taxes.
• Resale: Goods purchased for resale are exempt from sales and excise taxes.
• Books and Educational Materials: Exempt in many areas to promote education.
• Renewable Energy Equipment: Exempt to encourage green energy initiatives.

North Carolina Property Tax

Property taxes in North Carolina are determined at the local level and can vary significantly by county and municipality. The average effective property tax rate is approximately 0.85% of the property's assessed value. Factors influencing property taxes include property type, assessed value, and local tax rates.

In 2023, North Carolina collected approximately $7.25 billion in property taxes. These taxes are a critical source of funding for local governments, public schools, and essential services such as police, fire departments, and public infrastructure. The average property tax rate reflects the state's investment in maintaining high-quality public services and educational institutions.

North Carolina offers property tax exemptions for eligible homeowners, including seniors, veterans, and individuals with disabilities. Additionally, the state has programs aimed at reducing the property tax burden for low-income residents and those facing financial hardships.

Property Tax Rates by County (Selected Counties):

County Name	Average Effective Property Tax Rate
Mecklenburg County	0.90%
Wake County	0.85%
Guilford County	0.80%
Forsyth County	0.82%
Cabarrus County	0.80%
Cumberland County	0.88%
Durham County	0.83%
Buncombe County	0.79%
Union County	0.81%
New Hanover County	0.84%

North Carolina Gas Tax

North Carolina imposes a gas tax to fund transportation infrastructure:

• Regular Gasoline: 35 cents per gallon
• Diesel Fuel: 35 cents per gallon

These rates are subject to periodic adjustments based on legislative decisions and inflation.

In 2023, North Carolina's gas tax revenue amounted to approximately $4 billion, which funds highway maintenance, expansion projects, public transit improvements, and environmental initiatives aimed at reducing emissions. These rates are subject to periodic adjustments based on legislative decisions and inflation.

North Carolina has also implemented initiatives to promote electric vehicle (EV) adoption, including rebates for EV purchases, reduced registration fees, and investments in charging infrastructure. These efforts aim to reduce reliance on fossil fuels, decrease greenhouse gas emissions, and promote sustainable transportation options.

The state's investment in transportation infrastructure includes the expansion of major highways, maintenance of bridges, and development of bike lanes and pedestrian pathways to promote sustainable transportation options.

Other Taxes

Alcohol and Cigarette Taxes

• Alcohol: Taxed per gallon with rates varying by beverage type. For example, beer is taxed at $0.20 per gallon, wine at $0.30 per gallon, and spirits at $0.40 per gallon.
• Cigarettes: $4.50 per pack of 20 cigarettes.

These taxes contribute to public health initiatives, anti-smoking campaigns, and addiction treatment services, generating approximately $1 billion annually. The revenue supports programs aimed at reducing smoking rates, promoting public health awareness, and providing services to individuals struggling with addiction.

Additionally, North Carolina enforces strict regulations on the sale of alcohol and tobacco products to minors, ensuring compliance with state laws and promoting responsible consumption.

Estate Tax

North Carolina does not impose a state estate tax or inheritance tax. However, federal estate taxes may apply.

This means that beneficiaries do not pay taxes on inherited assets, making estate planning strategies such as establishing trusts and making lifetime gifts unnecessary for avoiding estate taxes in North Carolina.

Insurance Tax

Insurance companies operating in North Carolina are subject to a premium tax, which is a percentage of the gross premiums written. The standard rate is 6%, but certain types of insurance may have different rates. This tax can influence the cost of insurance products for consumers, contributing approximately $600 million in annual revenue.

The insurance tax revenue supports state programs related to insurance regulation, consumer protection, and public health initiatives. Additionally, the tax structure ensures that insurance companies contribute fairly to the state's revenue based on their business activities within North Carolina.

Corporate Taxes

North Carolina imposes a corporate income tax rate of 4.75% based on taxable income. In 2023, corporate taxes contributed over $4 billion to the state's revenue. Additionally, North Carolina levies a gross receipts tax on businesses operating within the state, further enhancing its tax base.

The state's corporate tax structure includes incentives designed to attract and retain businesses, fostering economic growth and job creation. North Carolina offers various tax credits for research and development (R&D), investment in economically distressed areas, and job creation, encouraging businesses to innovate and expand within the state.

North Carolina's competitive corporate tax rate aims to balance revenue generation with creating a business-friendly environment. The state has seen significant growth in sectors such as technology, manufacturing, healthcare, and renewable energy, contributing to an increase in corporate tax revenues and overall economic prosperity.

Additional Tax Information

Vehicle Registration Fees

North Carolina charges annual registration fees based on the vehicle's age, weight, and type. Electric vehicles (EVs) are subject to additional fees to compensate for the lack of gas tax contributions. In 2023, North Carolina introduced a $100 annual fee for EVs, which contributes to road maintenance and infrastructure improvements.

The state is also exploring incentives for EV adoption, such as rebates for new purchases and investments in charging infrastructure, aiming to reduce greenhouse gas emissions and promote sustainable transportation options.

Business Licenses and Permits

Businesses operating in North Carolina are required to obtain various licenses and permits, which may incur additional fees. These fees vary based on the type of business, location, and industry. The North Carolina Department of Revenue oversees the issuance and regulation of these licenses, ensuring compliance with state laws and standards.

Specialized industries, such as alcohol production, healthcare, construction, and energy, may have additional licensing requirements and associated costs. Staying informed about relevant regulations and fees is essential for business owners to maintain compliance and avoid penalties.

Tourism and Hospitality Taxes

North Carolina imposes specific taxes on the tourism and hospitality sectors, including hotel occupancy taxes and rental car surcharges. These taxes fund state and local tourism promotion, infrastructure projects, and public services that support the tourism industry.

In 2023, North Carolina collected approximately $1 billion in hotel occupancy taxes, which are used to enhance tourist attractions, maintain public parks, and support local economies reliant on tourism. The state also invests in marketing campaigns and infrastructure improvements to attract more visitors and promote sustainable tourism practices.

Conclusion

North Carolina's tax system features a flat income tax rate, moderate sales and property taxes, and various tax credits and deductions aimed at businesses and individuals. Understanding the nuances of North Carolina's tax obligations is essential for effective financial management. Staying informed about the various tax obligations and available credits can help residents and businesses navigate the Tar Heel State's tax landscape efficiently.

In 2023, North Carolina's total tax revenue exceeded $20 billion annually, supporting education, infrastructure, public services, and economic development initiatives. The state's comprehensive tax structure aims to balance revenue generation with economic growth and social equity. Property taxes fund essential services and educational institutions, while corporate taxes ensure that businesses contribute to the state's revenue.

North Carolina's business-friendly environment, characterized by competitive corporate tax rates and various tax incentives, attracts a diverse range of businesses, from startups to large corporations. Businesses benefit from tax incentives that encourage investment, job creation, and environmental sustainability. Staying informed about the various tax obligations and available credits is essential for effective financial management within the Tar Heel State. Utilizing available tax credits, understanding local tax variations, and consulting with tax professionals are key strategies for optimizing tax liabilities and maximizing financial benefits.

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Disclaimer: Tax laws are subject to change. This article is intended for informational purposes and reflects data available up to October 2023. For the most current information, consult the North Carolina Department of Revenue and other relevant state agencies.