Taxes in North Carolina: Features and Advantages

Main Taxes in North Carolina

Income Tax

North Carolina levies a flat personal income tax rate, which in 2024 is 4.5%, with a planned reduction to 3.99% by 2027. This makes the state’s tax system predictable and convenient for planning, especially for small business owners and high-income residents. Although the tax is not progressive, it is offset by broad deductions and standard exemptions.

Sales Tax

The base sales tax rate in North Carolina is 4.75%. Local surtaxes of 2% to 2.75% depending on the county bring the total rate in most areas to 6.75–7.5%. Sales tax applies to most goods and certain services, including short-term rentals, repair and professional services, as well as digital goods and online sales, which is especially important for e-commerce and remote businesses.

Our company provides a full range of services related to this tax: assisting with business registration for Sales Tax purposes, obtaining a Sales Tax Certificate, and preparing and filing Sales and Use Tax Returns. We advise entrepreneurs on taxation, rate calculation, and determining the taxable base in accordance with state law.

Property Tax

North Carolina does not set a uniform property tax rate at the state level — it is determined by counties and municipalities. On average, the effective property tax rate on residential property is about 0.77% of assessed value, which is below the U.S. average. Owners of a primary residence may benefit from various exemptions and deductions. For commercial property and rental property, rates may be higher, with possible additional local fees.

Business Taxes

North Carolina levies a corporate income tax at 2.5% in 2024 — one of the lowest in the country. Moreover, tax reform plans call for complete elimination of this tax by 2030, making the state attractive for corporations. The tax applies to C corporations. Meanwhile, LLCs and S corporations are exempt from corporate tax but must file an Annual Report and comply with registration requirements.

Franchise Tax

Rate: $1.50 per $1000 of the tax base. Minimum tax - $200.

Excise Taxes

Excise taxes in North Carolina apply to gasoline, tobacco, alcoholic beverages, and certain other goods. A notable feature is the relatively high rate on fuel and cigarettes, important for logistics and trade. Alcohol sales require licenses and strict compliance, especially in “dry” counties.

Favorable Tax Conditions in North Carolina

• The state’s tax system combines low rates and predictability, especially in terms of income and corporate taxation.
• Flat income tax rate, reduced corporate tax rates, and the planned elimination of corporate tax make the state particularly attractive for business.
• Relatively moderate property tax rates.
• No personal property tax on individuals.
• Tax planning opportunities through LLCs and S corps.

Taxes in North Carolina Compared to Other States

• Unlike California, New York, or Illinois, there are no high progressive personal income tax rates.
• The corporate tax rate is lower than most states and is planned for elimination.
• North Carolina levies a business tangible personal property tax if an organization owns equipment, machinery, or furniture.