North Carolina State Tax Guide 2025

Moving to North Carolina offers many benefits, from scenic mountains to vibrant cities. Understanding the tax landscape is a crucial part of your relocation planning. This guide provides an overview of North Carolina's tax structure for 2025, focusing on key areas relevant to new residents.

Income Tax

North Carolina has transitioned to a flat tax system, which simplifies filing for many residents.

• Tax Rate: The individual income tax rate is a flat 4.5% for the 2025 tax year.
• Flat vs. Progressive: This is a flat tax system. Unlike a progressive system where tax rates increase with higher income brackets, every taxpayer pays the same percentage on their taxable income, regardless of their earnings level.
• Filing: Residents file a North Carolina State Income Tax Return (Form D-400) annually.

Sales Tax

Sales tax in North Carolina is a combination of the state rate and local rates.

• State Rate: The statewide sales and use tax rate is 4.75%.
• Local Taxes: Counties and municipalities may levy additional local sales taxes. This means the total sales tax you pay at the register can vary depending on your location, typically ranging from 6.75% to 7.50% in most areas.
• What's Taxed: Most goods and many services are subject to sales tax. Groceries are taxable, but at a reduced state rate of 2.00% (plus any applicable local taxes).

Property Tax

Property taxes in North Carolina are administered at the county level and are a primary source of funding for local services like schools, fire departments, and libraries.

• No Statewide Rate: There is no single statewide property tax rate. Rates are determined by local counties and school districts.
• General Context: North Carolina's average effective property tax rate is generally below the national average. However, rates can vary significantly between counties.
• Assessment: Property is assessed annually as of January 1st. The tax is based on the appraised value of the real estate. Homeowners may be eligible for certain homestead exemptions, particularly seniors and disabled persons.

Other Notable Taxes

Beyond income, sales, and property taxes, new residents should be aware of the following:

• Gas Tax: North Carolina's motor fuels tax is adjusted annually. For 2025, it is projected to remain competitive with regional averages. The exact rate is set by the N.C. Department of Revenue each year.
• "Sin" Taxes: Excise taxes are levied on specific goods, including:
  • Alcohol: Rates vary by type of beverage (beer, wine, liquor) and are often higher for spirits.
  • Tobacco: North Carolina has a significant tobacco industry and imposes excise taxes on cigarettes and other tobacco products.
• Inheritance/Estate Tax: North Carolina does not have a separate inheritance or estate tax. However, federal estate tax laws still apply for larger estates.

Taxes for Retirees

North Carolina is a popular retirement destination, and its tax treatment of retirement income is a key consideration.

• Taxed Income: Most retirement income is taxable in North Carolina. This includes:
  • Social Security benefits (taxed to the same extent as they are at the federal level).
  • Pensions from former employers.
  • Withdrawals from 401(k)s, IRAs, and other retirement accounts.
• Standard Deduction: The state offers a standard deduction for all taxpayers, which can help reduce overall taxable income for retirees.
• No Special Exemptions: Unlike some states, North Carolina does not offer specific tax exemptions or deductions for seniors related to Social Security or pension income.

Comparison with Neighboring States

Here is a brief comparison of North Carolina's tax environment with its neighbors to help you make an informed decision.

Note: Rates are subject to change. This table provides a general snapshot for comparison.

Important Disclaimer

Tax laws, rates, and regulations are subject to frequent changes at the state and federal levels. This guide is for informational purposes only and is based on data available for the 2025 tax year. It is not a substitute for professional tax advice.

We strongly recommend consulting with a qualified Certified Public Accountant (CPA) or tax advisor to understand how North Carolina's tax laws will apply to your specific financial situation before making a move.