They say only two things are certain in life: death and taxes. Unfortunately, neither of the two topics are particularly exciting to the general public, but having a solid understanding of how they work can help you prepare for the inevitable. In this case, we’re talking about taxes—and they’re almost never as straightforward as they might seem (especially if you’re a first-time filer).

If you want to ensure you’re ready for tax season, take advantage of our North Carolina state income tax calculator. Using just a few key details, our tax tool helps you estimate your state tax liability and make sense of your state’s tax code regulations.

In order to truly understand how North Carolina taxes work, we need to establish some foundational tax knowledge first. If you have filed taxes before, you likely noticed that you had to file two tax returns: one for the federal government and one for your home state. These two returns are filed totally separately, and the rates and regulations that apply to federal and state taxes are very different.

Federal taxes are controlled by the U.S. Internal Revenue Service, or the “IRS” for short. The tax rules imposed by the federal government are the same across the board for all taxpayers in the nation, no matter which state they live in. Federal taxes support a variety of U.S. government funded programs such as federal insurance, food and housing assistance, and defense expenses.

State taxes on the other hand, do depend on your location. Each state has their own system and tax rates that they impose on their residents (and visitors, in some cases). In other words, North Carolina tax rates are different than in Florida or Vermont. How different? Sales taxes, income taxes, and property taxes may all differ—as well as how they’re paid and what they’re used for.

But you’re here to learn about how the Tar Heel State structures their tax system, aren’t you? See the quick facts below to get a basic idea of how much taxes are in North Carolina, or stick with us to learn all of the ins and outs of North Carolina state tax code.

North Carolina employs a single bracket system to impose income taxes. This means that all North Carolina taxpayers pay the same flat income tax rate (5.25%), no matter what their income is.

Many other states use a tiered system to impose income taxes—Hawaii for example, has 12 different tax brackets with corresponding income tax rates. North Carolina’s single tax bracket system can make filing taxes a whole lot easier compared to other states, but always make sure to be diligent and detailed in your work to ensure you’re following the filing standards for your state taxes.

Self-employment income is not subject to withholding, but that doesn’t mean it’s tax-free. In the U.S., if you earn your income as a self-employed taxpayer, you’re responsible for calculating and paying your own federal self-employment taxes. The federal SE tax is 15.3% of your adjusted gross income, of which 12.4% goes toward Social Security taxes and 2.9% accounts for Medicare fees.

In North Carolina, self-employment income is taxed the same as regular income but, since taxes are not withheld from your paycheck you may have to make quarterly estimated tax payments to the state. You can pay your North Carolina estimated taxes online or by mail.

The standard North Carolina income tax rate is 5.25%. To calculate your tax liability in North Carolina, all you need to do is multiply your North Carolina taxable income by 5.25%. Your taxable income is determined by a variety of state tax regulations and deductions—these are important to know about since they can save you money on your overall tax bill. No cities in North Carolina charge local income tax, so all you’ll need to worry about as far as income tax goes is the 5.25% state tax rate.

Take advantage of our North Carolina tax calculator to effortlessly estimate your own state income taxes.

In many states in the U.S., capital gains are treated a lot like income and they’re taxed like it, too. Capital gains are monies earned on the sale of a capital asset such as a business, shares on the stock market, or real estate property. North Carolina taxes capital gains at 5.8%, which is higher than the regular personal income tax rate of 5.25%.

x rate in North Carolina is 4.75%, plus any applicable local sales tax rates. Sales tax is a fee that’s applied to the sale of pretty much any item you purchase or rent (with the exception of food and other items in certain states). Sales taxes are controlled on a state level and can also be imposed by local government agencies such as city and county jurisdictions. Some states have high state sales tax rates, while others, like Montana, charge none at all.

If you’re more of an online shopper, you might have heard the term “use tax.” Use tax is another state-mandated tax that’s imposed on items that do not already have sales tax applied. These taxes are generally applied to items that are being brought in from another state, or being sold over the internet. In North Carolina, the state use tax fee is the same as the sales tax rate (4.75%).

In addition to North Carolina’s 4.75% sales and use tax, many local counties also charge sales tax fees of their own. The table below outlines the total sales tax rate in each county (state sales tax + local sales tax).

As we hinted before, sales and use taxes don’t cover all consumer goods. Certain items are actually taxed more aggressively than others, for a myriad of reasons. Excise taxes are special tax rates reserved for items that may be considered a threat to taxpayer health, the environment, or society as a whole. Common examples of excise taxes include: alcohol, tobacco, marijuana, and gasoline. If you plan on purchasing any of these items in the Tar Heel State, you’ll want to keep these excise tax rates in mind.

North Carolina charges different excise tax rates for malt beverages, wine, and liquor. These are considered “indirect taxes” because they are not charged directly to the consumer, but rather the manufacturer and/or vendor. However, consumers should keep in mind that these rates are typically built into the price of the product. This could translate into inflated prices on alcoholic beverages depending on your state’s excise tax regulations.

In an effort to reduce tobacco consumption across the country, many state governments impose high excise taxes on cigarettes and other tobacco products. Tobacco excise taxes are collected by the vendor and sent to the respective state Department of Revenue. North Carolina taxes cigarettes, vapor products, and other tobacco products at varying rates:

• Cigarettes: $0.45 per pack of 20 cigarettes
• Vapor products: $0.05 per fluid milliliter of consumable product
• Non-cigarette tobacco products: 12.8% of the cost price of the product(s)

You may want to think twice about your gas mileage if you’re a North Carolina driver. On top of state excise taxes on alcohol and tobacco, the state also imposes a motor fuel tax on gasoline consumption. According to the North Carolina Department of Revenue, motor fuel taxes have steadily increased over the years jumping 6.3% just over the last ten years.

The current motor fuels tax rate in North Carolina is 36.2%.

Insurance companies are subject to state taxes, too. These taxes are based on a rate of the premiums paid within the state and are typically built into the coverage costs that the consumer pays. In 2018, insurance companies paid approximately $589,037 in insurance premium taxes.

North Carolina charges different insurance tax rates depending on the type of insurance coverage provided:

• Workers’ Compensation 2.50%
• Other taxable contracts 1.90%
• Property coverage contracts (0.74%)
• Article 65 Corporations 1.90%
• Health Maintenance Organizations 1.90%
• Insurance Regulatory Charge (2015 - 2018) 6.50%

North Carolina’s average property tax rate is 0.81%. However, it’s important to note that North Carolina itself does not impose property taxes as part of their state tax code; instead, local county governments are in control of property tax. This means property tax rates vary throughout the state depending on how much the county decides to charge. Some counties like Hertford charge as much as 0.84% while others like Carteret tax property at just 0.31%. Find out what your county’s tax rate is using the table below.

North Carolina has repealed the inheritance tax for deaths on or after January 1, 1999. This means that inherited property is not taxable in the state. However, if you inherit property in a state that does impose inheritance tax, such as Maryland, you may have to pay that state’s tax rate.

The federal government and state governments both offer tax credits that can help taxpayers save money on their annual tax contributions (finally, we get a break!) If you’ve filed your taxes before, you’ve probably heard tax credits and deductions used interchangeably, but they’re actually quite different. Here’s how: tax credits lower a taxpayer’s tax bill dollar for dollar and tax deductions reduce the amount of income that is considered taxable, which could also help indirectly lower your tax bill.

North Carolina has two state-level tax credits that qualifying taxpayers can claim on their state tax return:

• Credit for income tax paid to another state or country
• Credit for rehabilitating a historic structure

Still overwhelmed by your North Carolina tax bill? Take advantage of the Tar Heel State’s standard or itemized deductions to help you maximize your savings when you file your state tax return. Let’s discuss both to see which makes the most sense for your tax situation.

If you qualified for the standard deduction on your federal taxes, you can claim the North Carolina standard deduction, too! The standard deduction works like this: based on your filing status, the state government allows you to reduce your taxable income by a certain fixed amount, which can help to lower your total tax liability. If you’re a single filer for example, the North Carolina standard deduction rate would allow you to subtract $8,750 from your taxable income. See the table below to find out how much you’d be able to deduct using North Carolina’s standard deduction rate.

If you do not wish to claim the standard deduction, you can claim North Carolina’s itemized deductions instead. Ideally, you’d want to choose the deduction structure that saves you the most money on your tax return. For some taxpayers the standard deduction makes sense, and for others claiming itemized deductions is a more effective course of action. If you’re not sure which method will work best for your tax deduction, you may want to enlist the help of a professional tax preparer.

North Carolina has four itemized deductions:

• Qualified mortgage and real estate property taxes
• Charitable contributions
• Medical and dental expenses
• “Claim of Right” deduction

Tax Tip: If you qualify for one (or many) of these state tax deductions, be sure you have the paperwork to back up your claim. If you claim the charitable contributions deduction for example, you’ll want to have a receipt and any other relevant information to prove that you meet the deduction standards.

Can’t wait for that North Carolina tax refund to arrive in the mail? Use our North Carolina tax calculator to estimate how much your refund will be this year. Our state tax calculator combines North Carolina tax code with your AGI, zip code, number of exemptions, dependents, and deductions to help you determine whether or not you’ll get a tax refund from the state.

After estimating, be sure to use these tax tips to help you file your taxes accurately and with best practices in mind:

• Keep detailed financial records year-round to help you support tax deductions and claims on your tax return.
• If you are a traditional employee, be sure to look closely at the annual wages and tax withholdings on your W-2 statement to confirm that everything is reported accurately.
• Self-employed taxpayers should determine whether they need to report estimated taxes to their state department of revenue quarterly, or by the standard April 15 tax deadline.

Wondering how you pay taxes in North Carolina? If you find that you owe taxes to the North Carolina Department of Revenue, simply use one of the following payment methods to settle your tax bill:

• Pay online: North Carolina taxpayers may pay their tax dues online by debit or credit card using the state’s online payment system.
• Pay by phone: To pay with a debit or credit card over the phone, call: 1-877-252-3252
• Pay by mail: You can also pay your state taxes in North Carolina by check, money order, or cashier’s check. Make the check or money order payable to the NC Department of Revenue and mail your payment to:
  
  NC Department of Revenue PO Box 2500 Raleigh, NC 27640-0002
• Pay in person: Finally, North Carolina taxpayers can pay their taxes in person by visiting their local service center.

• 45% personal income tax
• 2.8% corporate income tax
• 0% property tax
• 28.5% general sales tax
• 15.1% selective sales tax
• 8.3% license taxes
• 0.3% other

Let’s review: we’ve answered how much taxes are in North Carolina, what deductions and credits are available to you, and how to pay North Carolina state taxes. But what about that other tax return you have to file before you can say farewell to another tax year? Yep, we’re talking about your—dun-dun-dun—federal taxes.

Like we mentioned earlier, state and federal taxes are completely different systems; which means you’ll have to file a separate tax return in order to fulfill your federal tax responsibilities. But fear not, curious taxpayer, our team has the resources and expert tax knowledge to help you file your federal taxes, too.

Head over to our federal income tax hub to learn:

• How to calculate your federal tax liability
• How to claim federal tax deductions and credits
• How to file and pay your federal taxes
• How to calculate your federal tax refund