North Carolina tax rates are moderate by national standards: a flat 3.99 percent individual income tax in 2026, combined state and local sales taxes between 6.75 and 7.5 percent, locally set property taxes with no state-level levy, a 3 percent Highway Use Tax on vehicle purchases, and no estate or inheritance tax. Whether that feels “low” depends on which taxes hit your household hardest. The breakdown below walks through each major category so you can see what you actually owe.
Individual Income Tax
North Carolina charges a single flat rate on all taxable income rather than using graduated brackets. For the 2026 tax year that rate is 3.99 percent, down from 4.25 percent in 2025 and 4.50 percent in 2024.1North Carolina Department of Revenue. Tax Rate Schedules Additional reductions may take effect starting in 2027 if certain revenue triggers are met. A household earning $40,000 and one earning $400,000 pay the same percentage, though the standard deduction shields more of the lower earner’s income.
Standard deductions are $12,750 for single filers, $25,500 for married couples filing jointly, and $19,125 for head of household.2North Carolina Department of Revenue. North Carolina Standard Deduction or North Carolina Itemized Deductions These run higher than in many other flat-tax states, which softens the impact on lower-income households. A single filer earning $30,000, for example, pays state income tax on only $17,250.
There are no local income taxes anywhere in North Carolina, so 3.99 percent is the full income tax rate residents face. The Department of Revenue collects through payroll withholding or quarterly estimated payments.
How Retirement Income Is Taxed
Social Security benefits are fully exempt. If your benefits were included in federal adjusted gross income, you subtract the entire taxable amount on your state return.3North Carolina Department of Revenue. Social Security and Railroad Retirement Benefits Railroad Retirement Act benefits get the same treatment.
Everything else is taxed at the standard flat rate. Distributions from 401(k) plans, traditional IRAs, and most pensions are taxed at 3.99 percent, the same as wages. Military retirement pay flows through at that rate too. North Carolina offers no separate deduction or credit for pension income, so the Social Security exemption is the full extent of retirement-specific relief at the state level.
Sales and Use Tax
The state sales tax rate is 4.75 percent on most tangible goods, digital products, and certain services.4North Carolina Department of Revenue. Current Sales and Use Tax Rates Every county adds its own local tax on top. Most counties add 2 percent or 2.25 percent, bringing the combined rate to 6.75 percent or 7 percent. A handful of counties with voter-approved transit taxes push the total to 7.5 percent. The combined rate at the point of sale is what you pay, so a large purchase in one county can cost noticeably more than the same purchase next door.
Groceries get partial relief. Qualifying food bought for home consumption is exempt from the 4.75 percent state rate but still carries a flat 2 percent local tax in every county.5North Carolina Department of Revenue. Food, Non-Qualifying Food, and Prepaid Meal Plans Transit and other supplemental local rates do not apply to groceries. Prescription drugs and most medical devices are exempt from both state and local sales tax. Restaurant meals and prepared food are taxed at the full combined rate and may carry additional local prepared-food taxes in tourism-heavy areas.
Online purchases follow the same rules. Remote sellers with more than $100,000 in gross sales into the state during the current or prior calendar year must collect and remit, and marketplace platforms like Amazon carry the same obligation.6Streamlined Sales Tax. Remote Seller State Guidance If a remote seller fails to collect, the buyer technically owes an equivalent use tax on their state return.
Property Taxes
North Carolina does not levy a state-level property tax. That authority belongs entirely to counties and municipalities under the Machinery Act.7North Carolina General Assembly. North Carolina Code 105-271 – Official Title Every dollar stays local, funding schools, fire departments, roads, and other services. Your bill depends almost entirely on where you live.
Rates are expressed as a dollar amount per $100 of assessed value. A home assessed at $300,000 in a county with a $0.60 rate owes $1,800 per year to the county alone. Residents inside city limits pay a separate municipal rate on top of the county rate, which can add $0.30 to $0.70 or more per $100 and roughly double the total compared with an unincorporated address in the same county.
Counties must reappraise all real property at least every eight years, and many do so on a four-year cycle to avoid sharp jumps in assessed values.8Wake County Government. Revaluation If you believe your assessed value exceeds fair market value after a revaluation, you can appeal, first informally to the county tax office and then formally to the county Board of Equalization and Review.
Homestead Exclusion for Seniors and Disabled Homeowners
Homeowners who are 65 or older, or totally and permanently disabled, and whose annual income does not exceed $38,800 qualify for a property tax break. The exclusion covers the greater of $25,000 or 50 percent of the home’s appraised value. It applies only to a primary residence and up to one acre of land. Applications go through the county tax office, and you generally need to recertify eligibility periodically.
Vehicle and Fuel Taxes
North Carolina does not charge regular sales tax on vehicle purchases. Buyers pay a Highway Use Tax of 3 percent on the retail value of the vehicle, minus any trade-in allowance.9North Carolina General Assembly. Chapter 105 – Article 5A For most passenger cars and trucks there is no cap, so a $40,000 vehicle triggers $1,200 in Highway Use Tax. The only cap is $2,000 per title for Class A or Class B commercial motor vehicles and recreational vehicles.
Once you own the vehicle, property tax follows it. The state’s Tag & Tax Together program bundles the annual registration renewal fee with the local property tax on your vehicle into a single payment to the Division of Motor Vehicles.10North Carolina Division of Motor Vehicles. Tag and Tax Together You cannot renew your registration without also paying the property tax. The amount is based on the vehicle’s current fair market value and the rate in your county, so a newer or more valuable car costs more to register each year.
At the pump, North Carolina charges a motor fuel excise tax of 41.0 cents per gallon for 2026.11North Carolina Department of Revenue. 2026 Motor Fuels Tax Rate Memo This rate adjusts each January based on a formula tied to population growth and the Consumer Price Index.12North Carolina General Assembly. North Carolina General Statutes 105-449.80 – Tax Rate Revenue goes to the Highway Fund and the Highway Trust Fund for road construction and maintenance.
Corporate Income Tax
North Carolina is phasing out its corporate income tax. For the 2026 tax year, C-corporations doing business in the state pay 2 percent of their North Carolina net income.13North Carolina General Assembly. North Carolina General Statutes 105-130.3 – Corporations That rate was 2.25 percent in 2025, drops to 1 percent in 2028, and reaches zero after 2029. S-corporations are not subject to this tax.
Even at 2 percent, North Carolina already has one of the lowest corporate rates among the 44 states that impose one. Corporations still need to track and file on their North Carolina-sourced income during the phase-out, but by 2030 the tax disappears from the books.
No State Estate or Inheritance Tax
North Carolina repealed its inheritance tax effective January 1, 1999. The state kept an estate tax tied to the federal state death tax credit, but federal law phased that credit out in the early 2000s and North Carolina never decoupled. The practical result: no state-level tax when someone dies. Federal estate tax still applies to estates above the federal exemption, which for 2026 is $15 million per individual.14Internal Revenue Service. What’s New – Estate and Gift Tax The annual federal gift tax exclusion is $19,000 per recipient for 2026.