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.]
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North Carolina income taxes
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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?
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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.