North Carolina Tax Calculator

Income Tax
4.50%
flat (declining)
Sales Tax
6.98%
avg combined
Property Tax
0.80%
below average

North Carolina Income Tax

North Carolina uses a flat income tax rate of 4.50% for 2026. This is part of a legislated reduction plan:

  • 2023: 4.75%
  • 2024: 4.50%
  • 2025: 4.25% (scheduled)
  • 2026: 4.00% (scheduled, subject to revenue triggers)
  • Long-term goal: further reductions, potentially to 3.99% or lower

North Carolina switched from a graduated system (6%-7.75%) to a flat tax in 2014 at 5.8% and has been reducing the rate since.

North Carolina Sales Tax

North Carolina's state sales tax is 4.75%. Counties can add up to 2.75% in local sales taxes, with the average combined rate approximately 6.98%. Groceries are exempt from state sales tax (2% county tax may still apply). Prescription drugs are exempt.

North Carolina Property Tax

North Carolina's effective property tax rate is approximately 0.80%, below the national average. Property tax is administered at the county level and funds local schools, roads, and services. Major metro areas like Charlotte (Mecklenburg County) and Raleigh (Wake County) tend to have higher rates.

North Carolina's Tax Reduction Roadmap

North Carolina has been on one of the most aggressive tax reduction paths in the US. Since converting to a flat tax in 2014, the rate has decreased from 5.8% to 4.50%, with further reductions planned contingent on revenue targets. This trajectory has positioned North Carolina as a business-friendly, tax-competitive state attracting significant corporate relocations and population growth.

North Carolina vs. South Carolina

The Carolinas are frequently compared by people considering where to live in the Southeast:

  • Income Tax: NC flat 4.50% vs. SC graduated up to 6.4%. NC wins for most income levels.
  • Sales Tax: NC avg 6.98% vs. SC avg 7.44%. NC slightly lower.
  • Property Tax: NC 0.80% vs. SC 0.55%. SC lower, partly due to the 4% assessment ratio on primary residences.
  • Overall: For most earners, North Carolina has a lower total tax burden, especially at higher incomes where SC's 6.4% rate exceeds NC's 4.50%.

North Carolina vs. Other States

  • Georgia — 5.49% flat rate (higher than NC). Similar sales and property taxes. NC has the lower income tax.
  • Virginia — Graduated tax up to 5.75%. Higher income tax for most earners. Similar property tax. NC is generally lower.
  • Tennessee — No income tax but much higher sales tax (9.55% avg). For moderate earners, Tennessee may have lower total burden; for high earners, the sales tax difference narrows.

Frequently Asked Questions

What is North Carolina's income tax rate in 2026?
North Carolina has a flat income tax rate of 4.5% in 2026, reduced from 4.75% in 2024. The state has been cutting its income tax rate from 5.25% in 2021 under HB 334. Further reductions are planned, targeting 3.99% by 2027.
Does North Carolina tax retirement income?
North Carolina taxes most retirement income at the flat 4.5% rate. Social Security benefits are fully exempt. Government pensions for employees with 5 years of service by August 12, 1989 (Bailey Settlement) are also exempt. Private pensions, 401(k)s, and IRAs are taxable.
What is North Carolina's sales tax rate?
North Carolina has a 4.75% state sales tax rate. Counties add 2%-2.75% in local taxes, bringing the average combined rate to approximately 6.99%. Groceries are taxed at the reduced 2% state rate. Prescription drugs are exempt.
What is North Carolina's property tax rate?
North Carolina's effective property tax rate is approximately 0.80%, below the national average. Property is assessed at 100% of market value. Counties revalue on 4-8 year cycles. A homestead exclusion is available for seniors 65+ with income under $36,700.
Is North Carolina cutting its income tax?
Yes. North Carolina has been on an aggressive reduction path since 2013 when the rate was 5.8%. The current 4.5% rate is scheduled to drop to 3.99% by 2027, with proposals to eventually eliminate it entirely.