North Carolina state tax rates for 2026 include a flat 3.99 percent individual income tax, a 4.75 percent state sales tax (with local rates bringing the total to between 6.75 and 7.50 percent at the register), locally set property taxes, a 3 percent highway-use tax on vehicle titles, and a motor fuels tax of 41.0 cents per gallon. The state does not tax Social Security benefits and does not impose an estate or inheritance tax.
Individual Income Tax
North Carolina applies a single flat rate to every resident’s taxable income, regardless of earnings. For the 2026 tax year, that rate is 3.99 percent.1North Carolina General Assembly. North Carolina Code 105-153.7 – Individual Income Tax Imposed
The rate you actually use depends on which year’s return you are filing. If you are preparing a 2025 return in April 2026, the rate on that return is 4.25 percent.2NCDOR. Tax Rate Schedules The General Assembly has scheduled a steady phase-down:
- 2022: 4.99 percent
- 2023: 4.75 percent
- 2024: 4.50 percent
- 2025: 4.25 percent
- 2026 and after: 3.99 percent
Your tax bill on the same income shrinks each year without any action on your part.1North Carolina General Assembly. North Carolina Code 105-153.7 – Individual Income Tax Imposed
Standard Deduction
Before the flat rate is applied, you subtract a standard deduction from your federal adjusted gross income to reach your North Carolina taxable income. The amount depends on filing status:3NCDOR. North Carolina Standard Deduction or North Carolina Itemized Deductions
- Single: $12,750
- Married filing jointly or qualifying surviving spouse: $25,500
- Head of household: $19,125
- Married filing separately (spouse does not itemize): $12,750
- Married filing separately (spouse itemizes): $0
You can itemize instead if your qualifying expenses exceed the standard amount. North Carolina does not offer personal exemptions for the taxpayer, a spouse, or dependents.
Child Deduction
If you claim a federal child tax credit, you can also take a North Carolina child deduction of $500 to $3,000 per qualifying child. The amount phases down as income rises. A married couple filing jointly with AGI up to $40,000 gets the full $3,000 per child; the deduction drops to $500 at AGI between $120,000 and $140,000, and disappears above $140,000. Single filers get the full $3,000 only up to $20,000 of AGI, and nothing above $70,000.4NCDOR. North Carolina Child Deduction
Who Must File, and When
You must file a North Carolina return if your federal gross income exceeds the standard deduction for your status. For 2025 returns, the thresholds match the deduction amounts above, except for married-filing-separately when a spouse itemizes, in which case you must file regardless of income.5NCDOR. Individual Income Filing Requirements The 2025 return is due on or before April 15, 2026, with the deadline shifting to the next business day if it falls on a weekend or holiday.6NCDOR. When, Where, and How to File Your North Carolina Return
Sales and Use Tax
The statewide sales tax rate is 4.75 percent on most goods and some services. Counties add their own local sales and transit taxes on top, so the combined rate you pay at checkout runs from 6.75 to 7.50 percent depending on the county.7NCDOR. Current Sales and Use Tax Rates Counties can layer up to 2.75 percentage points under various authorizing statutes.8North Carolina General Assembly. North Carolina Local Sales Tax Articles
Groceries bought for home consumption are exempt from the 4.75 percent state rate, but a flat 2 percent local tax still applies. Prepared foods, restaurant meals, soft drinks, and candy are taxed at the full combined rate.9NCDOR. Food, Non-Qualifying Food, and Prepaid Meal Plans
When an out-of-state seller does not collect North Carolina sales tax, you owe use tax at the same 4.75 percent state rate (plus local) on anything you bring into or use in the state.
Vehicle and Fuel Taxes
Vehicle purchases are not subject to regular sales tax. A 3 percent highway-use tax is charged when a vehicle’s title is issued.10North Carolina General Assembly. North Carolina Code Chapter 105 – Article 5A – Highway Use Tax
The 2026 state motor fuels tax is 41.0 cents per gallon, plus a 0.25-cent inspection fee. Both are built into the pump price.11NCDOR. Motor Fuels Tax Rates
Property Tax
North Carolina has no state property tax. Counties and municipalities set and collect property taxes locally to fund schools, roads, and other services.12North Carolina General Assembly. North Carolina Code 105-274 – Property Subject to Taxation All real and personal property is taxable at its true value unless a specific statutory exclusion or exemption applies.
County boards of commissioners set rates each year as part of their budget. Rates are expressed in cents per $100 of assessed value and vary widely across the state. Your annual bill equals the assessed value divided by 100, then multiplied by the rate. Unpaid taxes can lead to liens or foreclosure.
Homestead Exclusion for Seniors and Disabled Residents
If you are 65 or older, or totally and permanently disabled, you may qualify for a homestead exclusion that removes the greater of $25,000 or 50 percent of your home’s appraised value from the tax rolls. You must be a North Carolina resident, and your prior-year income cannot exceed the eligibility limit (a $25,000 base, adjusted annually for cost of living). Applications are due by June 1 of the tax year.13North Carolina General Assembly. North Carolina Code 105-277.1 – Elderly or Disabled Property Tax Homestead Exclusion If only one spouse meets the age or disability requirement, the couple still receives the full benefit as long as they own and live in the home together.
Retirement Income
Social Security benefits are not taxed by North Carolina. If your federal return includes taxable Social Security or railroad retirement income, you deduct that amount on your state return.14NCDOR. Social Security and Railroad Retirement Benefits
Other retirement income, such as 401(k), IRA, or private pension distributions, is included in North Carolina taxable income at the flat rate. Retirees from North Carolina state government, local governments, or the federal government (including the military) may qualify for a full exemption under the Bailey settlement if they had five or more years of creditable service as of August 12, 1989.15NCDOR. Bailey Decision Concerning Federal, State and Local Retirement Benefits Retirees from other states’ government plans do not qualify.
Estate and Inheritance Tax
North Carolina has no estate tax and no inheritance tax. The state repealed its estate tax effective January 1, 2013.16North Carolina General Assembly. North Carolina Code Chapter 105 – Article 1A – Estate Taxes Federal estate tax still applies to large estates regardless of state of residence, and property inherited in another state may be subject to that state’s rules.
Corporate Income and Franchise Tax
C corporations pay a flat state tax on net income apportioned to North Carolina. The rate for 2026 is 2 percent, and the General Assembly has scheduled a continued phase-down:17North Carolina General Assembly. North Carolina Code 105-130.3 – Corporations
- 2025: 2.25 percent
- 2026: 2 percent
- 2028: 1 percent
- After 2029: 0 percent
S corporations are not subject to this tax. Once the phase-out is complete, the state will no longer have a corporate income tax.
Every active corporation doing business in North Carolina also owes an annual franchise tax.18North Carolina General Assembly. North Carolina Code 105-122 – Franchise or Privilege Tax on Domestic and Foreign Corporations For tax years beginning on or after January 1, 2025, the franchise tax is capped at $500 on the first $1,000,000 of the corporation’s tax base, with an additional $1.50 per $1,000 above that.19NCDOR. 2025 Corporate Income, Franchise, and Insurance Tax Bulletin Multistate corporations apportion their net worth to North Carolina.
Penalties and Interest on Late Taxes
North Carolina charges separate penalties for failing to file and failing to pay, and both can apply in the same month.20NCDOR. Penalties and Fees Overview
- Failure to file: 5 percent of the tax due for each month or partial month the return is late, up to 25 percent.
- Failure to pay: a flat 5 percent penalty on the unpaid tax.
These penalties come from G.S. 105-236.21North Carolina General Assembly. North Carolina Code 105-236 – Penalties The failure-to-pay penalty does not apply if you clear the balance within 45 days of receiving a proposed assessment notice from the Department of Revenue.
Interest also accrues on unpaid tax from the original due date until the balance is paid. The Secretary of Revenue sets the rate twice a year. From January 1 through June 30, 2026, the rate is 7 percent.22NCDOR. Interest Rate