North Carolina's income tax brackets for 2024

North Carolina has a flat income tax rate of 4.99% on all taxable income, regardless of how much you earn. This rate applies to wages, self-employment income, investment gains, and most other forms of income reported to the state.

The state used to have a graduated tax system with multiple brackets, but in 2021 it moved to a single flat rate. This means a person earning $30,000 and a person earning $300,000 both pay the same percentage of their taxable income to North Carolina — though the person earning more pays more in total dollars.

The 4.99% rate is separate from federal income tax, which has its own brackets and rules. You owe both North Carolina state tax and federal tax on the same income.

Key Takeaways

  • North Carolina charges a flat 4.99% state income tax on all taxable income, with no brackets or variations based on how much you earn.
  • This rate applies to wages, self-employment income, retirement distributions, and investment income, though some types of income are excluded or taxed differently.
  • North Carolina income tax is separate from federal income tax — you owe both on the same earnings.
  • Your employer withholds state income tax from your paycheck based on the W-4 form you file with them, and you can adjust your withholding if too much or too little is being taken out.
  • Self-employed people and those with investment income may need to make quarterly estimated tax payments to avoid penalties.

What income is taxed and what is not

The 4.99% rate applies to most income you receive, but North Carolina excludes certain types. Social Security benefits are not taxed by the state. Military retirement pay is also excluded, as is income from certain government pensions.

Wages from a job are fully taxable. Self-employment income is taxable, though you can deduct half of your self-employment tax when calculating your state taxable income. Interest and dividends are taxable. Long-term capital gains — profits from selling investments you held for more than a year — are taxed at the same 4.99% rate as ordinary income.

If you receive unemployment benefits, they are taxable in North Carolina. Retirement account withdrawals like 401(k) distributions and IRA withdrawals are taxable as ordinary income in the year you withdraw them. However, contributions you made to a traditional IRA may be deductible, which reduces your taxable income.

How withholding works on your paycheck

Your employer withholds North Carolina state income tax from your paycheck based on the information you provide on a Form NC-4, which is the state's withholding certificate. When you start a job, you fill out this form to tell your employer how much to withhold.

The amount withheld depends on your filing status, the number of dependents you claim, and any additional withholding you request. If you claim zero dependents and request no extra withholding, your employer will withhold the maximum amount, which is safer if you expect to owe tax but means you may get a larger refund. If you claim dependents or request less withholding, less money comes out of each check, but you risk owing money when you file.

You can change your withholding at any time by submitting a new NC-4 to your employer's payroll department. This is useful if your life changes — a marriage, a second job, or a major deduction — and you want to adjust how much is taken out.

Self-employment and estimated tax payments

If you are self-employed or have income that is not subject to withholding — such as rental income or significant investment gains — you may need to make quarterly estimated tax payments to North Carolina. These are payments you make four times a year to cover both state and federal tax on income that has no withholding.

Estimated payments are due on April 15, June 15, September 15, and January 15 of the following year. You calculate them based on your expected income for the year. If you do not make these payments and owe a large amount when you file, you may face penalties and interest.

The safest approach is to set aside a percentage of your self-employment income each month — many self-employed people put 25% to 30% aside — and then adjust after you file your return and see what you actually owed. A tax professional or accountant can help you calculate the right amount based on your specific situation.

Filing your North Carolina return

You file your North Carolina state income tax return using Form D-400, the individual income tax return. This form is due on the same date as your federal return — typically April 15 — though you can request an extension.

You can file electronically through the North Carolina Department of Revenue website, or you can mail a paper return. If you use tax software like TurboTax or TaxAct, it will usually prepare your North Carolina return at the same time as your federal return. Many people who have straightforward returns — just wages and standard deductions — can file for free using the state's free filing options.

When you file, you report all your income for the year, claim deductions and credits you are may have access to to, and calculate how much tax you owe. The state then compares this to what was withheld from your paychecks and any estimated payments you made. If too much was withheld, you get a refund. If too little was withheld, you owe the difference.

Deductions and credits that reduce your tax

North Carolina allows you to claim either the standard deduction or itemize your deductions, just like on your federal return. The standard deduction amount varies by filing status and age — it is higher if you are 65 or older. For 2024, the standard deduction ranges from $10,850 for single filers to $21,700 for married couples filing jointly.

Some deductions are specific to North Carolina. You can deduct contributions to a North Carolina 529 college savings plan, up to certain limits. Military retirement pay is excluded from income entirely, so you do not need to deduct it. If you are a teacher or work in certain other professions, you may have access to additional deductions.

North Carolina also offers tax credits — direct reductions in the tax you owe — for things like child and dependent care expenses, education expenses, and earned income. Credits are more valuable than deductions because they reduce your tax dollar-for-dollar rather than just reducing your taxable income.

Frequently Asked Questions

Do I have to file a North Carolina return if I live out of state?

If you earned income in North Carolina during the year, you must file a North Carolina return even if you live elsewhere. This includes wages from a job in the state, self-employment income earned there, or rental income from property in North Carolina. You may also owe tax to your home state, depending on where you live.

What happens if I do not pay my North Carolina income tax?

The North Carolina Department of Revenue can place a lien on your property, garnish your wages, or intercept your tax refund to collect unpaid tax. If you owe a significant amount, you can contact the department to set up a payment plan. Penalties and interest accrue on unpaid tax, so it is better to pay or arrange a plan than to ignore the debt.

Can I deduct federal income tax from my North Carolina return?

No. North Carolina does not allow you to deduct federal income tax paid. However, you can deduct state and local taxes (SALT) on your federal return, up to $10,000 per year, if you itemize deductions on your federal return.

Is retirement income taxed differently in North Carolina?

Most retirement income is taxed at the same 4.99% rate. However, military retirement pay is excluded entirely. Social Security is not taxed. Some government pensions may be excluded depending on when you retired and the type of pension. Check with the North Carolina Department of Revenue if you are unsure whether your specific retirement income is taxable.

What if I moved to North Carolina mid-year?

You file a part-year resident return if you moved into or out of North Carolina during the tax year. You report only the income you earned while you were a resident of the state. Your employer should have withheld the correct amount if you updated your W-4 when you moved, but if not, you may owe or receive a refund when you file.