North Carolina tax rates sit in the moderate range nationally. The state uses a flat 3.99 percent individual income tax for 2026, charges no tax on Social Security benefits, imposes no estate or inheritance tax, and keeps property taxes below the national average. Sales taxes and fuel taxes are close to the national norm, and the corporate income tax is on a scheduled path to zero.
Individual Income Tax
Every resident pays the same percentage of taxable income regardless of earnings. For the 2026 tax year, the rate is 3.99 percent.1North Carolina General Assembly. North Carolina General Statutes 105-153.7 – Individual Income Tax Imposed That continues a steady decline from 4.99 percent in 2022, with further reductions scheduled by the legislature.2NCDOR. Tax Rate Schedules Eight states charge no individual income tax at all, while a handful of states tax high earners above 13 percent. North Carolina’s flat rate lands in the lower-middle tier.
Before the rate applies, you subtract the standard deduction. For 2026:
- Single or married filing separately: $12,750
- Married filing jointly or surviving spouse: $25,500
- Head of household: $19,125
These amounts have been in effect since 2022 and are unchanged for 2026.3North Carolina General Assembly. North Carolina General Statutes 105-153.5 – Modifications to Adjusted Gross Income If you itemize on your federal return, you may itemize on your state return as well, though most filers find the standard deduction simpler.
Retirement Income and Social Security
North Carolina does not tax Social Security. If your Social Security or railroad retirement benefits appear in your federal adjusted gross income, you deduct the full amount on your state return.4NCDOR. Social Security and Railroad Retirement Benefits That is a meaningful advantage over the states that tax some or all of those benefits.
Private pensions, 401(k) distributions, and IRA withdrawals are generally taxed at the standard 3.99 percent rate.
Bailey Settlement Exclusion
Retirees from certain government plans get a full exemption. Benefits from the North Carolina Teachers’ and State Employees’ Retirement System, the Local Governmental Employees’ Retirement System, the Consolidated Judicial Retirement System, the Federal Employees’ Retirement System, or the U.S. Civil Service Retirement System are fully exempt from state income tax if you had five or more years of creditable service as of August 12, 1989. A similar exclusion covers state 401(k) and 457 plan benefits if you contributed before that date.5NCDOR. Bailey Decision Concerning Federal, State and Local Retirement Benefits
Sales and Use Tax
The base state sales tax is 4.75 percent on most retail goods and certain digital products. Counties add local taxes ranging from 2 percent to 2.75 percent.6North Carolina General Assembly. North Carolina Local Sales Tax Articles Combined rates in most counties come out to 6.75 or 7 percent, with a few transit-tax counties reaching 7.5 percent.7NCDOR. Current Sales and Use Tax Rates That is typical nationally; the population-weighted average combined state-and-local rate across all states sits near 7.5 percent.
Groceries and Prescription Drugs
Qualifying groceries skip the state 4.75 percent rate. Only a 2 percent local rate applies to most unprepared food, and transit taxes do not apply either.8NCDOR. Food, Non-Qualifying Food, and Prepaid Meal Plans Prepared foods, soft drinks, candy, dietary supplements, and vending-machine sales are taxed at the full combined rate.
Prescription drugs are exempt from both state and local sales tax. The exemption covers drugs that federal law requires to be dispensed by prescription, over-the-counter drugs sold on prescription, and insulin. Prosthetic devices, durable medical equipment, and medical supplies sold on prescription are exempt as well.9North Carolina General Assembly. North Carolina General Statutes 105-164.13 – Exemptions and Exclusions
Property Taxes
Property tax is entirely local. Counties and municipalities set the rates, and the state imposes no property tax of its own.10NCDOR. Property Tax Division Bills are calculated per $100 of assessed value, so a home worth the same dollar amount can generate very different bills depending on location. The state’s average effective property tax rate — total taxes paid as a share of home value — is roughly 0.62 percent, which ranks in the bottom half of states.
State law requires each county to reappraise all real property at least once every eight years, and many run shorter cycles of four to six years.11North Carolina General Assembly. North Carolina General Statutes 105-286 – Time for General Reappraisal of Real Property The state can require an earlier reappraisal if a county’s sales-to-assessment ratios drift too far from market values.
Vehicle Property Tax
Motor vehicles carry local property tax, collected through the Tag and Tax Together program. When you renew your vehicle registration, the bill combines the registration fee and your county vehicle property tax, and you cannot renew without paying both.12North Carolina Division of Motor Vehicles. Tag and Tax Together
Relief for Seniors, Disabled Residents, and Veterans
Two main exclusions reduce the taxable value of a qualifying homeowner’s residence:
- Elderly or disabled exclusion: if you are at least 65 or totally and permanently disabled as of January 1, and your prior-year income did not exceed $38,800 for 2026, a portion of your home’s appraised value is excluded.13NCDOR. Application for Property Tax Relief
- Disabled veteran exclusion: if you are a veteran with a permanent, total, service-connected disability, or the unremarried surviving spouse of one, the first $45,000 of appraised value is excluded, with no income limit.14North Carolina General Assembly. North Carolina General Statutes 105-277.1C – Disabled Veteran Property Tax Homestead Exclusion
Both require an application to your county tax office, and a qualifying owner who receives one exclusion cannot also receive the other.
Corporate Income and Franchise Tax
The corporate income tax rate for tax years beginning in 2026 is 2 percent, among the lowest in the country and still falling. The legislature has scheduled the rate to drop to 1 percent for tax years beginning in 2028 and to zero for tax years beginning after 2029.15NCDOR. Corporate Income, Franchise, and Insurance Tax Bulletin
Corporations also pay a separate franchise tax for the privilege of doing business or owning property in the state. The rate is $1.50 per $1,000 of the corporation’s tax base, with a $200 minimum. S corporations pay a flat $200 on the first $1,000,000 of tax base and $1.50 per $1,000 above that.16NCDOR. Corporate Income and Franchise Tax Rates The franchise tax is not currently scheduled for elimination.
Fuel, Tobacco, and Alcohol Taxes
The 2026 motor fuel tax is 41.0 cents per gallon, plus an inspection tax of 0.0025 cents per gallon.17NCDOR. Motor Fuels Tax Rates The tax is built into the pump price and funds highway and transportation work. The rate resets each year under a formula tied to population and fuel prices.
Cigarettes carry a state tax of $0.45 per pack of 20, among the four lowest state cigarette taxes nationally. Other tobacco products are taxed at 12.8 percent of the cost price.18Centers for Disease Control and Prevention. STATE System Excise Tax Fact Sheet Wholesalers and distributors pay these before products reach store shelves, so the cost is already reflected at retail.
Estate and Inheritance Tax
North Carolina has no state estate tax and no inheritance tax. The estate tax was repealed effective January 1, 2013, which leaves only the federal estate tax in play for estates above the federal exemption. Inherited assets are not subject to a separate state tax regardless of amount.