Navigating the complexities of state taxes can be daunting, but understanding North Carolina's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Tar Heel State's tax system, from income and sales taxes to property taxes and retirement benefits.
North Carolina state tax: Overivew
In North Carolina, residents benefit from a flat 4.5% income tax, making it easy to know what to expect. Sales taxes are around the national average, with property taxes on the lower side.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The state doesn't have estate or inheritance taxes, and most groceries are tax-free, though some localities may add their own rules. All in all, it's a state that makes taxes a bit more manageable.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
North Carolina income tax
North Carolina has a flat rate of 4.5% personal income tax rate. That rate is currently scheduled to drop over the next few years until it reaches 3.99 in 2027.
North Carolina retirement taxes
- Social Security: Not taxable
- Pensions: Taxable
- 401(k) and IRA Distributions: Taxable
North Carolina sales tax
North Carolina's state sales tax is 4.75%. According to the Tax Foundation, localities can add as much as 2.25%, and the average combined rate is 7%.
- Groceries: Exempt from state tax, but 2% local tax may apply
- Clothing: Taxable
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 3% highway-use tax
- Prescription Drugs: Exempt
What is the property tax rate in North Carolina?
In North Carolina, property taxes are 0.63% of assessed home value, according to the Tax Foundation.
North Carolina Property Tax Breaks for Retirees
North Carolina offers a homestead property tax exemption for eligible residents. The state excludes from property tax, a portion of the appraised value of a permanent residence. The owners must occupy the home and be 65 or older or totally and permanently disabled to qualify. Income limits also apply.
North Carolina gas tax
Gasoline: $0.35 per gallon
Diesel: $0.35 per gallon
Source: The Sales Tax Handbook
North Carolina taxes on alcohol and tobacco
North Carolina tobacco taxes
Product | Tax Amount |
|---|---|
Cigarettes | $0.45 per pack of 20 |
Other tobacco products | 12.8% of the wholesale price (no more than $0.30 per cigar) |
Source: The Sales Tax Handbook
North Carolina alcohol taxes
Product | Tax Amount |
|---|---|
Beer | $0.62 per gallon |
Wine | $1 per gallon |
Liquor | state controlled |
Source: The Sales Tax Handbook
North Carolina estate and inheritance tax
There is no estate or inheritance tax in North Carolina.
Related Content
-
US Increasing ESTA Fee to Nearly Double Starting Sept. 30New fee structure hikes ESTA from $21 to $40, adding a new layer to visitor costs under the One Big Beautiful Bill.
-
Can You Afford a Million-Dollar Home on a $250,000 Salary?It’s more than the sticker price — mortgage rates, down payments, taxes and debt all factor into whether a million-dollar home fits your budget.
-
The Final Countdown for Retirees with Investment IncomeRetirement Tax Don’t assume Social Security withholding is enough. Some retirement income may require a quarterly estimated tax payment by the September 15 deadline.
-
Standard Deduction 2025 Quiz: How Much Do You Really Know?Quiz Test your knowledge of IRS rules that impact how much money you keep in your wallet.
-
I'm 65 and My Property Taxes and Insurance Keep Going Up. How Can I Afford My House in Five Years?The costs of homeownership may continue to rise in retirement. Here's how to manage that.
-
IRS in Turmoil: GOP Budget Cuts and Staff Shake-Ups Threaten Taxpayer ServicesIRS Republican lawmakers advance a controversial budget bill that would gut IRS funding further, risking your 2026 tax filing season.
-
New ‘Taylor Swift Tax’ on Vacation and Second Homes: Is Your Home Next?Property Taxes An upcoming tax on luxury vacation homes is garnering attention on social media. Could a similar property tax land in your state soon?
-
Cruise Lines Sue to Block Hawaii’s New Climate Tourism TaxState Tax Your vacation to the Aloha State could come at a higher price tag next year. Here’s why.
-
21 Last-Minute Gifts for Grandparents Day 2025 to Give Right NowHoliday Tips Last-minute gifting is never easy. But here are some ideas to celebrate Grandparents Day.
-
New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers Age 65-PlusTax Changes If you’re an older adult, a new bonus tax deduction could provide a valuable tax benefit. Here's how it works.
