The tax bill for the average Tarheel is just $8,739, putting it among the most tax-friendly states in the country. When you consider that almost $5,000 of that is federal income taxes, it’s not hard to see that North Carolina is one state that has eased the burden of state and local taxes on its residents.
|North Carolina State Taxes|
|Rate Range of Taxes||0% to 7.5%|
|Sales Tax Rate Range||2% to 7.5%|
|Effective Property Tax||0.855%|
North Carolina State Income Taxes
North Carolina income tax is a flat tax, meaning the state charges a consistent rate of 5.499 percent without income tax rates that fall into different tax brackets based on income level. It’s one of just eight states that does this. But North Carolina’s standard deduction is $8,750 for individuals and $17,500 for married couples filing jointly, so you don’t start owing taxes until you’ve earned at least $8,750.
All told, the average North Carolinian is paying $2,212 a year in income taxes.
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North Carolina Sales Tax
North Carolina state tax on sales and use starts with a base rate of 4.75 percent with each county adding a local rate of between 2 and 2.75 percent.
|North Carolina Sales Tax|
|Statewide North Carolina Sales Tax Rate||4.75%|
|Highest Effective Sales Tax Rate||7.5%|
|Lowest Effective Sales Tax Rate||6.75%|
The local sales tax rates are relatively simple to follow as each county assesses either a 2 or 2.25 percent rate. Additionally, four counties have a 0.5 percent transit county sales and use tax: Durham, Mecklenburg, Orange and Wake.
The average rate comes to 6.95 percent, which translates to a total of $2,130 a year, meaning a lot of people in North Carolina end up paying more in sales tax than they do in state income tax.
But not everything is subject to sales and use taxes. Like most states, there are goods exempt from the tax in North Carolina, like food that’s not prepackaged or served for consumption on site. But North Carolina does charge the 2 or 2.25 percent local sales tax on qualifying food, exempting food purchases only from the statewide sales tax and the transit tax.
A number of categories of goods also have different sales tax rates. Manufactured and modular homes, and aircraft and qualified jet engines are taxed at just the state rate of 4.75 percent and are exempt from local and transit rates. A 7 percent combined general rate applies to telecommunications service and ancillary service, video programming service, spirituous liquor, electricity, piped natural gas and aviation gasoline and jet fuel.
Finally, boats are subject to a 3 percent sales tax that’s capped at $1,500 per boat and not subject to the local and transit sales tax.
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North Carolina Property Tax
Property taxes are assessed at the local level, so you’ll need to consult local rates to know for sure what you’ll be paying. But the effective rate statewide comes to 0.855 percent and costs the typical Tarheel a little under $1,500 a year. Below are all the effective tax rates for each county in North Carolina.
North Carolina property tax rates range from a low of 0.42 percent in Watauga County to a high of 1.22 percent in Durham County.
North Carolina Estate and Inheritance Taxes
North Carolina doesn’t charge an estate tax or an inheritance tax at the state level.
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