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Taxes in North Carolina

Updated: February 13, 2023
By: Lauren Hamer
Lauren Hamer
Editor
Bringing more than a decade of editorial experience to Retirement Living, Lauren focuses on reporting senior-related issues, including retirement planning, finance, consumer protection, and health and wellness. Lauren has edited consumer content for Credible, Angi, Slickdeals, Jobs for the Future, and more.
Editor
Edited by: Jeff Smith
Jeff Smith
Sr. Content Manager
As Retirement Living’s senior content manager, Jeff oversees the product and publishing of all retirement, investing, and consumer wellness content on the site. His extensive expertise in brand messaging and creating data-driven stories helps position Retirement Living as a top authority for senior content and community resources.
Sr. Content Manager
North Carolina - State

North Carolina tax rates aren’t particularly high or low comparatively. However, recent tax reform could lower the flat income tax rate even more in 2024 and thereafter. Below, we explain various North Carolina state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.

For information regarding taxes in other states, see Retirement Taxes by State.

North Carolina Tax Rates

State Taxes in North Carolina
State Sales Tax 4.75%
Avg State/Local Sales Tax 6.98%
Gas Tax $0.39 per gallon
Diesel Tax $0.39 per gallon
Cigarette Tax $0.45 per pack
Income Tax 4.99%
Effective Tax Rate: 4.99%
Property Tax 0.84%
Social Security Tax None
Medical/Dental Deduction: Yes
Federal Income Tax Deduction: None
Retirement Tax Partial

North Carolina State Taxes Explained

North Carolina Sales Tax

4.75%. Prescription drugs and medical equipment are exempt. Food is subject to a 2% county tax. Counties may also add up to 2.75% tax.

North Carolina Income Taxes

A flat rate of 4.99% for the 2022 tax year, but rates are going down further in the coming years (potentially to 3.99% by 2027).

North Carolina Property Taxes

All property, real and personal, is subject to taxation and assessed based on 100% appraised value. Cities and counties collect property taxes at an average rate of 0.84%, or $1,454 on a $172,500 home—the state’s median home value.

People age 65 or older or who are completely and permanently disabled qualify for an exclusion based on a portion of the appraised property value. The qualifying income typically raises yearly and is currently set at $33,800 or less. The greater of $25,000 or 50% of the residence’s appraised value may be excluded from taxes. Gifts or inheritances from a spouse or immediate family member do not count as income.

North Carolina’s Circuit Breaker Property Tax Deferment Program limits yearly taxes to a percentage of income. The qualifying owner must either be at least 65 years of age or totally and permanently disabled. The Current income limit is $33,800. Property owners with income over that amount but not exceeding 150% of the eligibility limit ($50,700 for 2021) will pay taxes equal to 5% of income. See North Carolina Property Taxes for more information.

North Carolina Retirement Taxes

Social Security is exempt. All other forms of retirement income are taxed at the North Carolina flat income tax rate of 5.25%. Although the state taxes retirement benefits, the standard deduction is $8,750 for single filers, $17,500 for joint filers and $14,000 for heads of household.

Military pay is exempt if the retiree had five years of creditable service as of August 12, 1989. Others may be allowed to exclude $4,000 of military retirement pay from income or $8,000 if married and filing jointly.

North Carolina has an income tax credit for premiums paid on long-term care insurance covering the individual, a spouse, or a dependent. The credit is equal to 15% of the premium cost not to exceed $350.

North Carolina Estate and Inheritance Taxes

North Carolina has no estate or inheritance tax.

For further information, visit the North Carolina Department of Revenue.