North Carolina State Tax Guide
North Carolina state tax rates and rules for income, sales, property, fuel, cigarette, and other taxes that impact residents.
North Carolina state tax: Overivew
North Carolina state tax includes a flat personal income tax rate. The state's sales taxes are generally considered to be near the national average and the state's property taxes are relatively low.
North Carolina, which doesn't have estate or inheritance taxes also doesn't tax groceries, although some localities do.
[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.]
Sign up for Kiplinger’s Free E-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.
North Carolina income taxes
North Carolina has a flat rate of 4.75% 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 doesn't tax Social Security benefits.
- Income from federal government retirement plans, or designated North Carolina state and local government retirement plans, is exempt if the retiree had five or more years of creditable service as of August 12, 1989. This exemption is known as the "Bailey exemption."
- Railroad Retirement benefits are also exempt.
North Carolina sales tax
North Carolina's state sales tax is 4.75%. According to the Tax Foundation, localities can add as much as 2.75%, and the average combined rate is 6.98%.
- 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 are property taxes in North Carolina?
In North Carolina, property taxes paid are generally about .82% of assessed home value, according to the Tax Foundaiton.
North Carolina Property Tax Breaks for Retirees
North Carolina offers a homestead property tax exemption for eligible residents. The state excludes from property taxes a portion of the appraised value of a permanent residence. The owners must occupy the home and be aged 65 or older or totally and permanently disabled to qualify. There are income limits that are listed on the state's website.
North Carolina gas tax (motor fuel)
Gasoline: Taxed in North Carolina at 40.5 cents per gallon effective January 1, 2023.
Diesel: 40.75¢ per gallon effective January 1, 2023.
North Carolina taxes on alcohol and tobacco
Product | Tax |
---|---|
Cigarettes | $0.45 per pack of 20 |
Other tobacco products | 12.8% of the wholesale price (no more than $0.30 per cigar) |
Vapor products | $0.05 per ml |
Source: The Sales Tax Handbook
Product | Tax |
---|---|
Beer | $0.62 per gallon |
Wine | $1 per gallon |
Liquor | $12.30 per gallon |
Note: The liquor tax is an estimate by the Distilled Spirits Council of the United States and published by the Tax Foundation.
North Carolina estate and inheritance taxes
There is no estate or inheritance tax in North Carolina.
As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
Seven Steps Couples Should Take Before Blending Their Finances
Getting on the same page now can ensure you remain successful throughout your relationship.
By Kiplinger Advisor Collective Published
-
Charitable Remainder Trust: The Stretch IRA Alternative
The SECURE Act killed the stretch IRA, but a properly constructed charitable remainder trust can deliver similar benefits, with some caveats.
By Brandon Mather, CFP®, CEPA, ChFEBC® Published
-
Retirees Face Significant Tax Bills Due to Fraud
Fraud A new report sheds light on how older adult scam victims end up with big tax bills and lost retirement savings.
By Kelley R. Taylor Last updated
-
Tax Day: Is the Post Office Open Late?
Tax Filing Tax Day means some people need to mail their federal income tax returns.
By Kelley R. Taylor Published
-
High Earners: Beware of These Illegal Schemes to Lower Taxes
Tax Schemes The IRS says high-income filers are targets for several illegal tax schemes.
By Katelyn Washington Last updated
-
Mailing Your Tax Return This Year? What to Know Before You Do
Tax Filing There are plenty of reasons not to mail your tax return this year, but here’s what you should know if you are.
By Katelyn Washington Last updated
-
IRS Warning: Beware of Smishing and 'Helper' Tax Scams
Scams Tax season is a time to look out for email and text message scams.
By Kelley R. Taylor Last updated
-
Most Expensive States to Live in for Homeowners
Property Taxes High property tax bills make the places on this list the most expensive states for homeowners to live in.
By Katelyn Washington Last updated
-
Don’t Miss This $2,500 Tax Break for Paying Your Student Loan
Tax Deductions Do you qualify for the student loan interest deduction this year?
By Katelyn Washington Last updated
-
How Much Richer Could You Be Without a Big Tax Refund?
Tax Refunds A big tax refund isn’t a reason to celebrate if you overpaid throughout the year. Here’s how much money your interest-free loan to the government could have cost you.
By Katelyn Washington Last updated