North Carolina Tax and CPA Services: State, County and City Taxes

North Carolina's rates are moving. The individual and corporate income tax rates are scheduled to fall, a county in the Charlotte area just raised its sales tax, and the legislature recently decided how much of the 2025 federal tax law to follow. If you live in North Carolina, work for a North Carolina employer or run a business there, this page covers what to watch for tax year 2025 returns and 2026 planning. It is general information, not personal advice.

A flat income tax that keeps stepping down

North Carolina taxes individuals at one flat rate, set at 4.25% for 2025 and 3.99% for 2026, with the rate for 2027 depending on revenue-based triggers. The state has no city or county income tax return to file alongside Form D-400. Local governments instead rely on property tax, local sales tax and taxes such as room occupancy and prepared food and beverage taxes.

Filing is required once federal gross income reaches the threshold for your status: for 2025, $12,750 single and $25,500 married filing jointly. Part-year residents and nonresidents with North Carolina-source income, such as property, a business or gambling winnings, complete Schedule PN to find the share of income taxed. That matters if you arrived on an H-1B or green card partway through 2025, or left North Carolina for another state.

Rule changes and retirement income

For 2025 North Carolina moved its reference to the Internal Revenue Code to July 5, 2025, but it did not adopt the new federal full expensing of domestic research costs. Individuals and businesses that deducted those costs federally add back 80% for 2025 and deduct 25% of the add-back in each of the next four years, which can create timing differences between federal and state returns.

Taxable Social Security and railroad retirement benefits are deductible on Schedule S, so Social Security is not taxed here (see how the federal side works). Military retirement pay is deductible for retirees with at least 20 years of service or a medical retirement.

Credits for tax paid to other states

Only residents may claim the credit for income tax paid to another state, using Form D-400TC. It is limited to the smaller of the tax actually paid or a share of your North Carolina tax, and you must attach the other return. The state allows no credit for taxes paid to a city or county. A North Carolina resident who commutes to a job in a city with its own wage tax therefore cannot offset that city tax here; our local payroll tax guide explains such taxes.

Business taxes, annual reports and the partnership election

The corporate income tax falls from 2.25% for 2025 to 2.00% for 2026. The franchise tax is separate: C corporations pay $1.50 per $1,000 of the tax base (minimum $200), while S corporations pay $200 on the first $1,000,000 of the base plus $1.50 per $1,000 above it. LLCs formed here pay a $125 articles of organization fee, and the Secretary of State charges an annual report fee of $200 for LLCs and $25 for corporations.

North Carolina's workaround for the federal SALT cap is the Taxed Partnership election, made on the partnership return (Form D-403). Directive TA-23-1 widened which partners can be in an electing partnership, but the guidance addresses partnerships, so confirm eligibility and the current rate before assuming it fits an S corporation. Our multi-state tax service models the choice.

Sales tax and the Mecklenburg increase

The general state sales and use tax rate is currently 4.75%, and counties add their own. On July 1, 2026, Mecklenburg County, which includes Charlotte, levied an additional 1.00% county rate. Its combined rate went from 7.25% to 8.25%, with exceptions for items such as qualifying food, electricity and telecommunications. Retailers must collect the higher rate on sales sourced to the county, buyers owe it as use tax when it is not collected, and new returns apply to periods beginning July 1, 2026. Remote sellers should review sales and use tax compliance.

Payroll in North Carolina

Employees give you Form NC-4, not the federal W-4 (see the withholding FAQ). North Carolina has no depository system for withholding: quarterly filers pay by the last day of the month after quarter end, monthly filers by the 15th, and everyone files the annual NC-3 reconciliation. Nonresidents are subject to withholding on wages for services performed in the state.

Unemployment insurance goes through the Division of Employment Security. The taxable wage base is $34,200 for 2026 (it was $32,600 for 2025) and the beginning rate for new employers is 1.000%. See our guides to state unemployment insurance and payroll services.

Property tax

Counties and municipalities levy the tax, county assessors value property, and the Department of Revenue publishes rates and reappraisal years. Appeals can reach the Property Tax Commission, so check a county's reappraisal year before you buy or appeal.

How we can help North Carolina clients

We help residents of Charlotte, Raleigh, Cary and elsewhere with D-400 filings, part-year returns and Schedule PN, review the 2025 research-cost add-back, and register employers for NC-4 withholding and unemployment accounts. Our Charlotte metro page describes how remote service works. Illinois taxpayers with North Carolina income should also review the Illinois guide.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.