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North Carolina Tax Law

Perhaps you started your own business in North Carolina last year. Tax day is coming but you can’t figure out what to write off as a business expense. Is the property tax on your vehicle a business expense? Can you write off your medical bills? Is there a tax credit for operating your business out of your home? These are some of the many tax questions that may arise.

Whether you live in Charlotte, Greensboro or Raleigh, you’ll need to account for the various state and federal taxes in your budget, including everyday sales and gasoline taxes. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s North Carolina tax law articles to become familiar and avoid penalties.

North Carolina Personal Income Taxes

North Carolina is one of eight states that charges a single, flat personal income tax rate to all taxpayers regardless of income or filing status. In tax year 2017, North Carolina’s personal income tax rate is 5.499 percent.

North Carolina taxpayers can reduce the amount of tax they pay or increase their tax refund by qualifying for tax credits. Some of the tax credits available in 2017 include:

  • Child Credit—You can receive up to $125 for each dependent child under your care.
  • Out-of-State Income Tax Credit—This tax credit can be claimed if your personal income is taxable in another state. It’s meant to provide relief from being taxed twice on the same income.
  • Historic Tax Credits Investment Program—This program rewards tax credits for the rehabilitation of a historic structure/property and historic mill facilities.

North Carolina Sales and Use Taxes

North Carolina’s general state sales and use tax rate is 4.75 percent as of January 2017. However, most counties charge between six and 7.25 percent in sales and use taxes. Sales and use taxes apply to the retail prices of goods and the costs of services in North Carolina. The use tax is like the sales tax but is applied to goods and services sourced from out-of-state/county vendors and sellers.

North Carolina Property Taxes

There are three main types of property that are taxed in North Carolina: real property, personal property and motor vehicles.

Real property is taxed based on the appraised value of real estate, which is influenced by renovations, historic rehabilitation and other value-added improvements. Anything that isn’t real property (e.g. business equipment and anything that isn’t integral to real property) is considered personal property. Personal property is taxed largely based on its true dollar value.

Every county in North Carolina charges its own property tax rates as a fractional dollar amount per $100 in property valuation. While there are many factors that adjust how much property tax you’ll pay, there’s a simple way to calculate an approximate tax amount.

North Carolina Sin Taxes

“Sin” taxes are levied on consumer products like alcohol and tobacco wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.

North Carolina imposes the following sin taxes:

  • $0.6171/gallon of malt beverages (e.g. beer).
  • $0.2634/liter of unfortified wine.
  • $0.2934/liter of fortified wine.
  • 30 percent on (antique) spirituous liquors sold in North Carolina Alcoholic Beverage Control (ABC) stores or distilleries.
  • $0.0225/individual cigarette.
  • 8 percent for other tobacco products.
  • $0.05/fluid milliliter of vapor products.
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