North Carolina Tax: Guide to Income, Sales, Property, and Retirement Taxes

picture of North Carolina state flag on flag pole against blue sky — (Image credit: Getty Images)

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.

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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

An aerial view of the profile of Asheville, North Carolina

(Image credit: Getty Images)

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

Still life of a small shopping cart with $1 USD bills

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

rendering of a yellow car against a yellow background

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

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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

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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.

Kelley R. Taylor is the senior tax editor at Kiplinger.com, where she breaks down federal and state tax rules and news to help readers navigate their finances with confidence. A corporate attorney and business journalist with more than 20 years of experience, Kelley has helped taxpayers make sense of shifting U.S. tax law and policy from the Affordable Care Act (ACA) and the Tax Cuts and Jobs Act (TCJA), to SECURE 2.0, the Inflation Reduction Act, and most recently, the 2025 “Big, Beautiful Bill.” She has covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and energy tax credits. Her award‑winning work has been featured in numerous national and specialty publications.