North Carolina tax rates for 2026 are built around a flat 3.99 percent individual income tax, a 4.75 percent state sales tax (6.75 to 7.50 percent once local rates are added), locally set property taxes, a 2 percent corporate income tax that is on a path to zero, an annual franchise tax on corporations, and a 41.0-cent-per-gallon motor fuel tax.1NCDOR. About the NCDOR There is no state estate or inheritance tax. Here is what each one costs and how it applies to you.
Individual Income Tax
North Carolina taxes individual income at a single flat rate. Every resident pays the same percentage regardless of income. Under N.C. Gen. Stat. § 105-153.7, the rate has been stepping down on a set schedule:2North Carolina General Assembly. North Carolina Code 105-153.7 – Individual Income Tax Imposed
- 2023: 4.75 percent
- 2024: 4.50 percent
- 2025: 4.25 percent
- 2026 and after: 3.99 percent
The rate applies to your North Carolina taxable income, which starts with your federal adjusted gross income and is then adjusted for state-specific items. The biggest adjustment for most filers is the North Carolina standard deduction. For the 2025 tax year, the most recently published figures, those amounts are $12,750 for single filers, $25,500 for married couples filing jointly, and $19,125 for heads of household.3NCDOR. North Carolina Standard Deduction or North Carolina Itemized Deductions They are lower than the federal standard deduction, so some people who owe no federal tax still owe North Carolina tax.
You must file a North Carolina return (Form D-400) if your gross income exceeds the filing threshold for your status. For tax year 2025, that threshold matches the standard deduction amounts above. Part-year residents and nonresidents who earned income in North Carolina must file if their total gross income exceeds the threshold.4NCDOR. Individual Income Filing Requirements
Sales and Use Tax
The state sales tax rate is 4.75 percent on most tangible goods and certain services. Counties add their own rate of 2 to 2.75 percent on top of that, which puts the combined rate you actually pay at the register between 6.75 and 7.50 percent depending on where you shop.5NCDOR. Current Sales and Use Tax Rates
Groceries are exempt from the 4.75 percent state portion, but a 2 percent local tax still applies. Candy and soft drinks do not qualify as groceries for this exemption. Prescription medications are fully exempt from both state and local sales tax.
If you buy something from an out-of-state retailer that does not collect North Carolina tax, you owe use tax at the same combined rate. Report it on your Form D-400 if you file an income tax return, or on Form E-554 if you do not.6NCDOR. Consumer Use Tax
Property Tax
There is no state property tax in North Carolina. Counties and municipalities levy property taxes on real and personal property within their jurisdiction.7North Carolina General Assembly. North Carolina Code 105-274 – Property Subject to Taxation Bills are ad valorem (based on assessed value) and the rate is set as a dollar amount per $100 of value. A $200,000 home in a jurisdiction with a $0.60 rate would owe $1,200 for the year.
Each county must reappraise real property at least every eight years, and many do so more often.8North Carolina General Assembly. North Carolina Code 105-286 – Time for General Reappraisal of Real Property A reappraisal can change your assessed value and your bill even when the rate stays flat.
Qualifying older or disabled homeowners can apply for the Homestead Exclusion or the Circuit Breaker Deferment, both of which require an application by June 1. For 2026, the Homestead Exclusion income limit is $38,800 and the exclusion removes the greater of $25,000 or 50 percent of the home’s appraised value from taxation.9NCDOR. Application for Property Tax Relief
Retirement Income and Social Security
Social Security benefits are not taxed. If taxable Social Security income appears on your federal return, you deduct it on your state return using Form D-400 Schedule S, which takes it out of your North Carolina taxable income.10NCDOR. Social Security and Railroad Retirement Benefits
Other retirement income is treated differently. Distributions from traditional 401(k) plans, IRAs, and pensions are fully taxable at the 3.99 percent flat rate. There is no separate deduction or exclusion for them.
Corporate Income Tax
C corporations doing business in North Carolina pay a corporate income tax of 2 percent for the 2026 tax year, down from 2.25 percent in 2025. S corporations do not pay this tax; their income passes through to the owners.11North Carolina General Assembly. North Carolina Code 105-130.3 – Corporations Multistate corporations apportion their income to North Carolina using a sales-factor formula and report on Form CD-405.12NCDOR. 2024 Corporate Income, Franchise, and Insurance Tax Bulletin
The rate is scheduled to keep falling and eventually reach zero:13NCDOR. Corporate Income and Franchise Tax Rates
- 2025: 2.25 percent
- 2026–2027: 2 percent
- 2028–2029: 1 percent
- 2030 and after: 0 percent
Franchise Tax
Corporations also pay an annual franchise tax, which is separate from the income tax and will remain in place after the corporate income tax reaches zero.14North Carolina General Assembly. North Carolina Code 105-122 – Franchise or Privilege Tax on Corporations The rate is $1.50 per $1,000 of the corporation’s tax base, with a $200 minimum. S corporations pay $200 on the first $1,000,000 of base and $1.50 per $1,000 above that. Holding companies use the same rate structure but are capped at $150,000.13NCDOR. Corporate Income and Franchise Tax Rates
Motor Fuel Tax
The motor fuel excise tax is 41.0 cents per gallon on gasoline, diesel, and alternative fuel for the 2026 calendar year.15NCDOR. Motor Fuels Tax Rates Wholesale distributors pay it, and it is built into the pump price. The rate adjusts annually using a formula that weighs the change in state population at 75 percent and the change in the energy Consumer Price Index at 25 percent.16North Carolina General Assembly. North Carolina Code 105-449.80 – Tax Rate The money flows into the Highway Fund and the Highway Trust Fund for road and bridge work.17North Carolina General Assembly. North Carolina Code 136-176 – Creation, Revenue Sources, and Purpose of North Carolina Highway Trust Fund
What North Carolina Does Not Tax
North Carolina has no state estate tax and no inheritance tax. When a resident dies, no state tax is owed on property passing to heirs. Larger estates can still owe federal estate tax to the IRS once they exceed the federal exemption, which is $13.99 million per individual for 2025 with an adjustment expected for 2026. If you inherit property located in a state that does impose an estate or inheritance tax, that state’s rules can apply regardless of where you live.