How North Carolina Income Tax Is Calculated
The calculation has three steps. Most of the work is already done on your federal return.
Step 1: Start With Federal Adjusted Gross Income
North Carolina begins with the adjusted gross income from your federal Form 1040. That figure already reflects pre-tax contributions to a 401(k), an HSA, and a traditional IRA, so anything that lowers your federal adjusted gross income lowers your NC tax too. You then make a few NC adjustments. The most common are subtracting Social Security benefits that were taxed federally and subtracting interest on US Treasury bonds.
Step 2: Subtract Your Deductions
Next you subtract either the NC standard deduction or your NC itemized deductions, whichever is larger, and then the child deduction if you qualify. Most filers use the standard deduction. The details are in our NC standard deduction guide.
Step 3: Apply the 3.99% Rate
Multiply what remains by 3.99%. For example, a single filer earns a $65,000 salary and puts $5,000 into a 401(k). Federal adjusted gross income is $60,000. Subtracting the $12,750 standard deduction leaves $47,250 of NC taxable income, and 3.99% of that is $1,885. That works out to about 2.9% of the full salary, because the first $12,750 is not taxed at all.
What You Owe at Different Incomes
These tables show 2026 North Carolina income tax for filers who take the standard deduction and have no children. Income here means federal adjusted gross income.
Single Filers
| Income | NC Taxable Income | NC Income Tax | Share of Income |
|---|
| $30,000 | $17,250 | $688 | 2.3% |
| $50,000 | $37,250 | $1,486 | 3.0% |
| $75,000 | $62,250 | $2,484 | 3.3% |
| $100,000 | $87,250 | $3,481 | 3.5% |
| $150,000 | $137,250 | $5,476 | 3.7% |
| $250,000 | $237,250 | $9,466 | 3.8% |
Married Filing Jointly
| Income | NC Taxable Income | NC Income Tax | Share of Income |
|---|
| $50,000 | $24,500 | $978 | 2.0% |
| $75,000 | $49,500 | $1,975 | 2.6% |
| $100,000 | $74,500 | $2,973 | 3.0% |
| $150,000 | $124,500 | $4,968 | 3.3% |
| $250,000 | $224,500 | $8,958 | 3.6% |
How Children Change the Number
Parents subtract a child deduction on top of the standard deduction. A married couple earning $90,000 with two children deducts an extra $3,000, which lowers their NC tax from $2,574 to $2,454. A head of household earning $48,000 with two children deducts an extra $4,000 and owes $993 in place of $1,152. The deduction is larger at lower incomes and phases out completely at $70,000 for single filers, $105,000 for heads of household, and $140,000 for joint filers.
What North Carolina Taxes and What It Does Not
North Carolina follows the federal definition of income in most cases, with a few exceptions that matter a great deal to retirees and service members.
Income That Is Taxed
Wages, salaries, tips, bonuses, and self-employment income are taxed at 3.99%. So are interest, dividends, rental income, unemployment benefits, and gambling and lottery winnings. Capital gains get no special rate in North Carolina. A long-term gain that the IRS taxes at 0% or 15% is still taxed at 3.99% by the state, as our NC capital gains tax guide explains. Withdrawals from 401(k) plans and traditional IRAs and most private pensions are also taxed.
Income That Is Exempt
- Social Security benefits are fully exempt. See our guide on Social Security taxes in NC.
- Military retirement pay is exempt for retirees with at least 20 years of service or a medical retirement. See the NC military pay tax guide.
- Certain government pensions are exempt under the Bailey settlement for employees who had five years of service by August 12, 1989.
- Railroad retirement benefits are exempt.
- Interest on US Treasury obligations and on North Carolina state and local bonds is exempt.
Our NC retirement income tax guide covers each of these in detail.
Federal Deductions North Carolina Does Not Allow
The federal tax law passed in 2025 created deductions for tip income, overtime pay, car loan interest, and taxpayers 65 and older. North Carolina chose not to adopt them. Tips and overtime that are partly deductible on your federal return are fully taxable on your NC return. North Carolina also has no deduction for state income tax paid and no charitable deduction for people who take the standard deduction.
Deductions and Credits
North Carolina keeps its list of tax breaks short. That is part of how it keeps the rate low.
Standard Deduction or Itemized Deductions
You can itemize on your NC return even if you take the federal standard deduction. NC itemized deductions are limited to mortgage interest and property taxes, capped at a combined $20,000, plus charitable contributions and medical expenses above 7.5% of income. Because the list is narrow, the standard deduction is the better choice for most people.
The Child Deduction
North Carolina gives parents a deduction, not a credit, for each child who qualifies for the federal child tax credit.
| Deduction per Child | Single | Head of Household | Married Filing Jointly |
|---|
| $3,000 | Up to $20,000 | Up to $30,000 | Up to $40,000 |
| $2,500 | $20,001 to $30,000 | $30,001 to $45,000 | $40,001 to $60,000 |
| $2,000 | $30,001 to $40,000 | $45,001 to $60,000 | $60,001 to $80,000 |
| $1,500 | $40,001 to $50,000 | $60,001 to $75,000 | $80,001 to $100,000 |
| $1,000 | $50,001 to $60,000 | $75,001 to $90,000 | $100,001 to $120,000 |
| $500 | $60,001 to $70,000 | $90,001 to $105,000 | $120,001 to $140,000 |
| $0 | Over $70,000 | Over $105,000 | Over $140,000 |
Our NC child tax credit and deduction guide explains how this works alongside the federal credit.
Tax Credits
North Carolina has few credits for individuals. There is no state earned income tax credit and no state credit for child care expenses. The credit most people encounter is the credit for income tax paid to another state, which prevents the same income from being fully taxed twice. It matters if you live in North Carolina and work across the state line, or if you moved during the year. Our moving to North Carolina tax guide covers part-year returns.
Withholding, Estimated Payments, and Filing
Most North Carolina income tax is paid during the year, not at filing time.
Withholding From Your Paycheck
Your employer withholds NC tax based on the Form NC-4 you filled out. The withholding formula subtracts the standard deduction and $2,500 for each allowance you claimed, then applies 4.09%, which is the tax rate plus a small cushion required by state law. If your withholding is too high or too low, give your employer a new NC-4. See the NC W-4 and NC-4 guide and our guide to reading your NC pay stub.
Estimated Payments
If you are self-employed or have income with no withholding, you pay the state directly in four installments using Form NC-40. Estimated payments are required when you expect to owe $1,000 or more for the year. For 2026 income they are due April 15, June 15, September 15, and January 15, 2027. Our NC estimated tax payments guide has the worksheets, and the NC self-employment guide covers the rest of what freelancers owe.
Filing Your Return
You file Form D-400 if your income is above the standard deduction for your filing status, or if you want a refund of tax that was withheld. The 2026 return is due April 15, 2027. If you receive a federal extension, North Carolina grants one automatically, though an extension to file is not an extension to pay. Our guides cover filing NC taxes for free, extensions, refunds, and late filing penalties.
How North Carolina Compares With Neighboring States
A flat rate helps some taxpayers and not others. The comparison with nearby states depends on income.
State Income Tax on the Same Income
| State (2026) | System | Tax on $40,000 | Tax on $75,000 | Tax on $150,000 |
|---|
| North Carolina | 3.99% flat | $1,087 | $2,484 | $5,476 |
| South Carolina | 1.99% and 5.21% | $498 | $2,657 | $6,849 |
| Georgia | 5.09% flat | About $1,430 | About $3,210 | About $7,020 |
| Virginia | 2% to 5.75% | About $1,490 | About $3,500 | About $7,810 |
| Tennessee | No tax on wages | $0 | $0 | $0 |
| Florida | No income tax | $0 | $0 | $0 |
Figures are for a single filer using each state's standard deduction. The Georgia and Virginia figures are estimates.
Where North Carolina Comes Out Ahead
North Carolina is the lowest of the neighboring states that tax wages once income passes roughly $68,000, and its advantage grows with income. It is lower than Georgia and Virginia at every income level in the table. South Carolina is the exception at lower incomes. Its 2026 overhaul made it cheaper than North Carolina for single filers earning under about $68,000. Our NC vs. SC tax comparison has the details.
The No-Income-Tax States
Tennessee and Florida collect no tax on wages, which no flat rate can beat. Those states raise money in other ways, mainly through higher sales taxes in Tennessee and higher insurance and property costs in parts of Florida. Our NC vs. Florida vs. Texas comparison works through the full picture.
Frequently Asked Questions
What is North Carolina's income tax rate for 2026?
The rate is a flat 3.99% for tax year 2026, down from 4.25% for 2025. It applies to all taxable income after the standard deduction, regardless of how much you earn. The rate is scheduled to fall to 3.49% for tax years 2027 through 2029.
How much North Carolina income tax will I pay on $75,000?
A single filer with $75,000 of income and the standard deduction pays $2,484 in North Carolina income tax for 2026, which is about 3.3% of income. A married couple filing jointly with the same income pays $1,975. In 2027, when the rate drops to 3.49%, the single filer's tax falls to about $2,173.
Do North Carolina cities or counties charge income tax?
No. North Carolina does not allow local income taxes. You pay the same state rate whether you live in Charlotte, Raleigh, or a rural county. Local governments raise money through property tax and sales tax instead.
What can I do to lower my North Carolina income tax?
Because North Carolina starts from federal adjusted gross income, the most effective move is to lower that number. Contributions to a 401(k), 403(b), or 457(b) plan, an HSA, and a deductible traditional IRA all reduce it. Each $1,000 contributed saves $39.90 in NC tax on top of the federal savings. Our guide to year-end tax moves covers what to do before December 31.
Sources: NC Department of Revenue; NC General Statute § 105-153.5 and § 105-153.7; Session Law 2026-41 (rate schedule).
