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 subject to state tax. The rate was lowered from 4.75% to 4.99% in 2024, so if you filed last year, your rate may have been different.
Unlike federal income tax, which uses brackets that increase as your income rises, North Carolina does not have progressive tax brackets. Everyone pays the same percentage. This means a person earning $30,000 and a person earning $300,000 both pay 4.99% on their taxable income—though the higher earner pays more in total dollars.
Your taxable income is not the same as your gross income. You subtract the standard deduction (which varies by filing status and age) and any other deductions you claim before explore the 4.99% rate. For the 2024 tax year, the North Carolina standard deduction ranges from $10,750 for single filers to $21,500 for married couples filing jointly.
Key Takeaways
- North Carolina's income tax rate is a flat 4.99% on all taxable income, with no brackets that increase based on earnings.
- The standard deduction reduces your taxable income before the 4.99% rate is applied, so not all of your earnings are taxed.
- The state rate of 4.99% is separate from federal income tax, which has its own brackets and rates.
- Certain types of income, such as Social Security benefits and some retirement distributions, may be partially or fully exempt from North Carolina tax.
What income is subject to North Carolina tax
North Carolina taxes most forms of income: wages from employment, self-employment income, interest, dividends, capital gains, rental income, and retirement account withdrawals. If you work in North Carolina or live there, you owe state tax on income earned anywhere.
Some income is exempt. Social Security benefits are not taxed by North Carolina. Military pensions and certain other government pensions receive special treatment—North Carolina allows a deduction for military retirement pay and some federal employee pensions. Distributions from a Roth IRA are generally not taxed, though contributions you made with pre-tax dollars may be.
If you have income from multiple states, you may owe tax to more than one. North Carolina allows a credit for taxes paid to other states to prevent double taxation, but you will need to file in both places and calculate the credit yourself or with a tax preparer.
How the standard deduction lowers your tax bill
The standard deduction is a fixed dollar amount you subtract from your gross income before calculating tax. For 2024, North Carolina's standard deductions are:
| Filing Status | Standard Deduction |
|---|---|
| Single | $10,750 |
| Married filing jointly | $21,500 |
| Married filing separately | $10,750 |
| Head of household | $16,100 |
| Age 65 or older (add to above) | $1,500 |
If you are 65 or older, you add an extra $1,500 to your standard deduction. So a single filer age 65 or older would subtract $12,250 before the 4.99% rate is applied.
You can also itemize deductions instead of taking the standard deduction if your itemized deductions are larger. Itemized deductions on your North Carolina return include mortgage interest, property taxes, charitable donations, and medical expenses above a certain threshold. Most people use the standard deduction because it is simpler and often larger.
North Carolina tax compared to federal income tax
Your North Carolina state tax is separate from federal income tax. The federal government uses progressive brackets—your tax rate increases as your income rises, ranging from 10% to 37% depending on your bracket. North Carolina's flat 4.99% is added on top of whatever federal tax you owe.
If you earn $50,000 as a single filer in 2024, you would owe federal income tax based on the federal brackets (roughly 12% on most of that income) plus North Carolina state tax of 4.99% on your taxable income after the standard deduction. The two are calculated separately on different forms.
Some states have no income tax at all. North Carolina does, so if you are comparing the cost of living between states, factor in the 4.99% state rate in addition to federal tax and any local taxes.
Self-employment income and North Carolina tax
If you are self-employed, you owe North Carolina income tax on your net self-employment income at the same 4.99% rate. You also owe federal self-employment tax (Social Security and Medicare), which is separate and calculated on Schedule SE.
To calculate your North Carolina taxable income as a self-employed person, start with your gross business income, subtract business expenses, and then subtract the standard deduction. The 4.99% rate applies to what remains. You can also deduct half of your self-employment tax from your income before explore the state rate, which lowers your tax bill slightly.
If you have a loss in your business, you can use that loss to offset other income you earned that year, potentially lowering your overall North Carolina tax. Keep records of all business income and expenses, because the state may request them during an audit.
Recent changes to North Carolina's tax rate
North Carolina's income tax rate has changed several times in recent years. In 2021, it was 4.75%. It increased to 4.99% in 2024. The state legislature periodically adjusts the rate, so it is worth checking the current year's rate when you file, especially if you are comparing your tax burden to a previous year.
The state also periodically adjusts the standard deduction amounts to account for inflation. The amounts listed above are for the 2024 tax year. When you file for 2025, the standard deduction will likely be slightly higher.
Frequently Asked Questions
Do I owe North Carolina income tax if I live in another state but work in North Carolina?
Yes. North Carolina taxes income earned within the state, regardless of where you live. If you work in North Carolina and live in another state, you owe North Carolina tax on your wages. You may also owe tax to your home state, depending on that state's rules. You can claim a credit for taxes paid to North Carolina on your home state return to avoid paying twice on the same income.
Is North Carolina income tax withheld from my paycheck automatically?
Yes, if you are an employee. Your employer withholds North Carolina income tax from each paycheck based on the W-4 form you complete. The amount withheld is an estimate; when you file your return, you may owe more, receive a refund, or break even depending on whether the withholding matched your actual tax liability.
What happens if I do not file a North Carolina tax return?
If you owe tax and do not file, the state can assess penalties and interest on the unpaid amount. If you are owed a refund, you have a limited time to claim it—typically three years. If you are unsure whether you need to file, contact the North Carolina Department of Revenue or a tax preparer.
Can I deduct property taxes on my North Carolina return?
Only if you itemize deductions instead of taking the standard deduction. North Carolina allows a deduction for state and local property taxes, but you must itemize to use it. Most people find the standard deduction is larger, so they do not itemize.
Does North Carolina tax retirement income differently?
Social Security is not taxed. Military pensions and some federal employee pensions receive a deduction. Traditional IRA and 401(k) withdrawals are taxed as ordinary income at 4.99%. Roth IRA withdrawals are generally not taxed. The treatment depends on the type of retirement account and income source.