Key Tax Facts: North Carolina
- Flat 4.25% rate for tax year 2025, falling to 3.99% in 2026
- Bailey settlement exempts certain government retirees from state tax
- Social Security benefits are exempt
- No deduction for federal income taxes paid
Estimate Your 2026 Federal and North Carolina State Income Tax
North Carolina State Income Tax Overview
North Carolina has a flat state income tax rate of 4.25% for tax year 2025, down from 4.5% in 2024. H.B. 259 accelerated the reduction schedule, and the rate drops to 3.99% in 2026 with further cuts tied to revenue triggers. North Carolina moved to a flat tax in 2014, replacing a graduated system. The standard deduction is $12,750 for single filers and $25,500 for married couples filing jointly, well above most states. North Carolina does not tax Social Security benefits and exempts military retirement pay for qualifying veterans, but it does tax most other retirement income, including IRA and 401(k) distributions.
What Is Different About North Carolina's Income Tax
Deductions and exemptions
North Carolina's standard deduction is $12,750 for single filers and $25,500 for joint filers for 2025. Itemizers may deduct mortgage interest and property taxes up to a combined $20,000 cap, charitable contributions, and medical expenses. There are no personal exemptions. The flat rate is 4.25% for 2025 and scheduled to reach 3.99% for 2026.
Credits worth knowing
North Carolina has a child deduction of up to $3,000 per child that phases out with income, rather than a credit. Other credits are limited to a credit for taxes paid to other states and a credit for rehabilitating historic structures. The state repealed its earned income credit in 2014.
Retirement, capital gains, and other income
Social Security is exempt. Under the Bailey settlement, federal, state, and local government pensions are exempt for retirees who had five years of service before August 1989, and military retirement pay became fully exempt in 2021. Private pensions and 401(k) or IRA withdrawals are taxed at the flat rate, as are capital gains.
Rules summarized from the North Carolina Department of Revenue guidance for tax year 2026. Amounts that index annually are described in general terms; confirm the current figure on the official form instructions.
North Carolina Income Tax Rate (2026) projected
North Carolina uses a flat income tax rate -- the same percentage applies to all taxable income regardless of how much you earn.
What a North Carolina Resident Actually Pays: A Worked Example
| Taxable Income | $65,000.00 |
| North Carolina Flat Rate | 4.25% |
| Estimated State Tax | $2762.50 |
| Effective Rate | 4.25% |
Where North Carolina Stands Among the 50 States
North Carolina's top rate of 4.25% ranks #32 of the 41 states that tax wages -- among the ten lowest of the states that levy the tax at all. The median top rate across those 41 states is 5.2%, so North Carolina is below the middle of the pack. It is one of 14 states with a single flat rate, so every taxable dollar is taxed at 4.25% and the effective rate never climbs with income the way it does in the 27 graduated-rate states.
On sales tax the picture is similar: North Carolina's combined state and average local rate of 6.99% ranks #26 of 50, against a national median of 7.00%.
North Carolina State Tax at Five Income Levels (2026, single filer)
| Taxable income | North Carolina tax | Effective rate | Marginal rate |
|---|---|---|---|
| $40,000 | $1,700 | 4.25% | 4.25% |
| $65,000 | $2,763 | 4.25% | 4.25% |
| $100,000 | $4,250 | 4.25% | 4.25% |
| $150,000 | $6,375 | 4.25% | 4.25% |
| $250,000 | $10,625 | 4.25% | 4.25% |
Brackets applied directly to the taxable-income figure shown, before North Carolina-specific deductions, exemptions, or credits. Federal tax is separate and comes on top of every row.
North Carolina vs. Its Neighbors on $75,000 of Taxable Income
A North Carolina resident with $75,000 of taxable income pays about $3,188 in state income tax. Of North Carolina's 4 neighboring states, 1 would tax that income less and 3 would tax it more.
| State | Structure | Tax on $75,000 | Top rate | Sales tax |
|---|---|---|---|---|
| North Carolina (you) | Flat | $3,188 | 4.25% | 6.99% |
| Tennessee | No income tax | $0 | None | 9.55% |
| South Carolina | Rate to 6% | $3,858 | 6% | 7.44% |
| Georgia | Rate to 5.19% | $3,893 | 5.19% | 7.36% |
| Virginia | Rate to 5.75% | $4,055 | 5.75% | 5.75% |
Frequently Asked Questions -- North Carolina Income Tax
Does North Carolina have a state income tax?
Yes. North Carolina imposes a state income tax with a flat rate of 4.25%. This is separate from your federal income tax obligation.
What is the North Carolina income tax rate for 2026?
North Carolina uses a flat income tax rate of 4.25% on all taxable income, regardless of income level or filing status.
Do I have to file a North Carolina state tax return?
Most full-year North Carolina residents with income above the state filing threshold must file a state return. Check the North Carolina Department of Revenue for current thresholds and requirements.
How accurate is this estimate?
The federal figure uses the official IRS 2026 brackets and standard deduction. The North Carolina figure applies the 2026 single-filer rate schedule to the same taxable income; it does not model North Carolina-specific deductions, exemptions, credits, or local income taxes, so treat it as a planning number and confirm with the North Carolina Department of Revenue or a tax professional before filing.
How does North Carolina compare with nearby states?
On $75,000 of taxable income, North Carolina collects about $3,188. Tennessee collects $0, South Carolina collects $3,858, Georgia collects $3,893, Virginia collects $4,055. See the comparison table above.
Where does North Carolina rank on state income tax?
North Carolina's top rate of 4.25% ranks #32 of the 41 states with an income tax, against a median top rate of 5.2%. Its combined sales tax of 6.99% ranks #26 of 50.
Does this calculator include federal income tax?
Yes. It estimates your 2026 federal income tax using the official IRS 2026 brackets, then applies the North Carolina rate schedule to the same taxable income and shows both figures plus the combined total.
Where can I find official North Carolina tax forms?
Official forms, instructions, and filing guidance are available at the North Carolina Department of Revenue.
What is the sales tax rate in North Carolina?
North Carolina's combined state and average local sales tax rate is 6.99%. This is separate from income tax and applies to most retail purchases -- use our sales tax calculator to check a specific purchase.
When are North Carolina 2026 state taxes due?
2026 taxes are generally filed in 2027. The North Carolina filing deadline is April 15, 2027, the same as the federal deadline.
Understanding Your North Carolina Tax Estimate
Your results combine two separate bills: federal tax owed to the IRS, and North Carolina state tax owed to the North Carolina Department of Revenue. The state return is filed separately from your federal Form 1040, with a state filing deadline of April 15. For the mechanics of how bracket math actually works -- why your effective rate is almost always lower than your top bracket -- see our marginal vs. effective tax rate guide.
Lowering Your North Carolina Bill
Pre-tax retirement contributions reduce your federal and North Carolina taxable income in the same move -- see our 401(k) contribution limits and HSA limits guides for the current caps. Beyond that, North Carolina-specific credits and deductions that don't exist at the federal level are listed at the North Carolina Department of Revenue -- worth checking, since these are easy to miss if you only look at federal guidance.
Combined Sales + Income Tax Picture
North Carolina's combined state-plus-average-local sales tax rate is 6.99%. If you're self-employed, that's an added layer on top of income tax -- our self-employment tax calculator covers the SE-specific piece separately.
Disclaimer: Estimates for educational purposes only. State tax results are approximations based on published bracket data and do not account for all deductions, credits, exemptions, local taxes, or individual situations. Not tax, legal, or financial advice. Consult the North Carolina Department of Revenue or a qualified tax professional for guidance specific to your situation.