North Carolina Income Tax Rates & Brackets (Tax Year 2025 — Filed in 2026)
⚠️Informational only — not legal or tax advice.
Tax year covered: 2025 (returns filed in 2026)
Applies to: Income earned January 1 – December 31, 2025
Returns filed: January – April 2026
Last verified: February 12, 2026
Table of Contents
- Quick Reference
- Key Takeaways
- Quick Questions
- North Carolina Income Tax Rates and Brackets (2026)
- Statutory Authority
- Who Must File North Carolina Income Tax
- What Income Is Taxable in North Carolina
- Standard Deduction and Exemptions
- North Carolina Income Tax Credits
- Filing Deadlines
- Filing Options for North Carolina Income Tax
- Local Income Taxes
- Special Considerations for North Carolina Income Tax
- Tax Residency vs Domicile
- Documentation Commonly Requested in Residency Audits
- Military Personnel
- Retirees
- Students
- Part-Year Residents
- Common Tax Filing Situations
- Forms & Publications
- Penalties and Interest
- Information Verification Log
- Resources
- Where to Check for Updates
- Tax Glossary
- Update History
Quick Reference
Does North Carolina have income tax? Yes
Tax structure: Flat rate
Tax rate: 4.25%
Standard deduction (Single): $12,750
Standard deduction (Married): $25,500
Local income tax: No
Official source: https://www.ncdor.gov/taxes-forms/individual-income-tax
Key Takeaways
- Residents: North Carolina residents pay state income tax on income from all sources
- Non-residents: Non-residents pay North Carolina income tax only on North Carolina-source income
- Tax rate: North Carolina has a flat income tax rate of 4.25% for Tax Year 2025
- Local income tax: North Carolina does not permit local income taxes
- Reciprocity: North Carolina does not have reciprocal agreements with other states
- Primary forms: Form D-400 for residents, Form D-400 with Schedule PN for non-residents and part-year residents
Quick Questions About North Carolina Income Tax
What is the North Carolina income tax rate for 2025? North Carolina has a flat income tax rate of 4.25% (0.0425) for Tax Year 2025. This rate applies to all taxable income regardless of filing status or income level.
Does North Carolina have state income tax? Yes. North Carolina imposes a state income tax at a flat rate of 4.25% for Tax Year 2025.
What are the income tax brackets in North Carolina? North Carolina does not have tax brackets. The state uses a flat tax rate of 4.25% that applies to all taxable income for Tax Year 2025.
Is Social Security taxed in North Carolina? No. North Carolina does not tax Social Security benefits. All Title 2 Social Security benefits and Tier 1 or Tier 2 railroad retirement benefits are fully exempt from state income tax.
Does North Carolina tax retirement income? North Carolina’s treatment of retirement income varies by type. Military retirement pay is fully exempt for qualified servicemembers. Certain state, local, and federal government retirement benefits may be exempt under the Bailey decision. Private pension income and 401(k)/IRA distributions are generally taxable.
Do I need to file a North Carolina income tax return? You must file if you were a North Carolina resident and your gross income exceeded $12,750 (single), $25,500 (married filing jointly), or $19,125 (head of household). Part-year residents and non-residents with North Carolina-source income must also file if they meet these thresholds.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax
North Carolina Income Tax Rates and Brackets (2026)
The following tax rate applies to income earned in 2025, reported on tax returns filed in 2026.
| Rate Snapshot | |
|---|---|
| Tax Attribute | Amount/Status |
| Lowest Tax Rate | 4.25% |
| Highest Tax Rate | 4.25% |
| Tax Structure | Flat rate |
| Number of Brackets | 1 (flat rate) |
| State Income Tax | Yes |
| Local Income Tax | No |
| Standard Deduction (Single) | $12,750 |
| Standard Deduction (Married Filing Jointly) | $25,500 |
| Personal Exemption | None |
| North Carolina Income Tax Brackets 2026 | |
|---|---|
| North Carolina uses a flat tax rate that applies uniformly to all filing statuses. | |
| Taxable Income | Tax Rate |
| All taxable income | 4.25% |
Calculation: North Carolina income tax = North Carolina taxable income × 4.25% (0.0425)
| Standard Deduction by Filing Status | |
|---|---|
| Filing Status | Standard Deduction |
| Single | $12,750 |
| Married Filing Jointly | $25,500 |
| Married Filing Separately* | $12,750 |
| Head of Household | $19,125 |
| Qualifying Widow(er) / Surviving Spouse | $25,500 |
*If spouse claims itemized deductions, the standard deduction is $0
Statutory Authority
State income tax in North Carolina is authorized under the following legal framework:
Constitutional Authority:
- North Carolina Constitution, Article V – Revenue and Taxation
- Grants the General Assembly authority to levy taxes for public purposes
Statutory Authority:
- North Carolina General Statutes Chapter 105 – Taxation
- Article 4 – Income Tax
- G.S. § 105-153.3 through § 105-153.10 (Individual income tax provisions)
- Session Law 2023-134 (Establishes current rate structure)
- Link to official code: https://www.ncleg.gov/Laws/GeneralStatuteSections/Chapter105
Administrative Regulations:
- North Carolina Administrative Code, Title 17, Chapter 6 – Revenue
- Link to regulations: https://www.ncdor.gov/taxes-forms/individual-income-tax
Legislative History:
- Original enactment: North Carolina has taxed individual income since 1921
- Major amendments: Tax Simplification and Reduction Act (2013) – transition to flat rate structure
- Current structure effective: Tax Year 2014 (flat rate implemented)
- Tax Year 2025 rate: 4.25% per Session Law 2023-134
- Future rate: 3.99% scheduled for Tax Years beginning after 2025
This page compiles information directly from these statutory and regulatory authorities as implemented by the North Carolina Department of Revenue.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax and https://www.ncleg.gov/Laws/GeneralStatuteSections/Chapter105
Who Must File North Carolina Income Tax
Residents
North Carolina tax law requires residents to file a state income tax return if:
- A federal income tax return is required, OR
- Gross income exceeds the thresholds shown below
| Filing Requirements Chart for Tax Year 2025 | |
|---|---|
| Filing Status | Gross Income Threshold |
| Single | $12,750 |
| Married Filing Jointly | $25,500 |
| Married Filing Separately (spouse does not itemize) | $12,750 |
| Married Filing Separately (spouse itemizes) | $0 |
| Head of Household | $19,125 |
| Qualifying Widow(er) / Surviving Spouse | $25,500 |
| Nonresident Alien (regardless of status) | $0 |
Residency Definition: You were a resident of North Carolina if:
- You were domiciled in North Carolina at any time during 2025, OR
- You resided in North Carolina during 2025 for other than a temporary or transitory purpose
183-Day Rule: In the absence of convincing proof to the contrary, an individual present within North Carolina for more than 183 days during the taxable year is presumed to be a resident. However, absence for more than 183 days does not raise a presumption of non-residency.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements
Part-Year Residents
Part-year residents file if they were a North Carolina resident for part of the year and had income from any source during their period of residency, or received income from North Carolina sources during their period of non-residency.
You were a part-year resident if:
- You moved to North Carolina and became a resident during 2025, OR
- You moved out of North Carolina and became a resident of another state during 2025
Income reporting:
- Report all income earned while a North Carolina resident
- Report North Carolina-source income earned while a non-resident
- Complete Form D-400 Schedule PN to determine the taxable percentage
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Non-Residents
Non-residents file if they had income from North Carolina sources during the tax year and their total gross income from all sources (inside and outside North Carolina) exceeds the filing threshold for their filing status.
North Carolina-source income includes:
- Wages earned while working in North Carolina
- Business income from North Carolina operations
- Rental income from North Carolina property
- Gambling income from North Carolina activities
- Income attributable to ownership of any interest in real or tangible personal property in North Carolina
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements
What Income Is Taxable in North Carolina
Fully Taxable Income
North Carolina taxes the following types of income:
- Wages and salaries
- Self-employment income
- Business income
- Investment income (interest, dividends, capital gains)
- Retirement account distributions (401(k), traditional IRA, etc.)
- Rental income
- Partnership and S Corporation income
- Alimony received (if taxable for federal purposes)
- Gambling and lottery winnings
- Unemployment compensation
- Taxable scholarship and fellowship income
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Social Security Benefits
North Carolina does not tax Social Security benefits.
All Title 2 Social Security benefits received under the Social Security Act are fully exempt from North Carolina income tax. This exemption also applies to:
- Tier 1 railroad retirement benefits received under the Railroad Retirement Act
- Tier 2 railroad retirement benefits
- Railroad unemployment insurance benefits
- Railroad sickness benefits
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Military Retirement Pay
North Carolina fully exempts military retirement pay for qualified servicemembers.
A retired member of the United States Uniformed Services or their eligible beneficiary may deduct the following payments received from the United States government:
Fully deductible:
- Uniformed Service retirement payments received by a retired member who served at least 20 years in the Uniformed Services, OR
- Military retirement payments received by a member who was medically retired from the Uniformed Services
- Payments from the Survivor Benefit Plan to a beneficiary of a qualified retired member
Not deductible:
- Severance payments received due to separation under 10 U.S.C. Chapter 61
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open and https://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/bailey-decision-concerning-federal-state-and-local-retirement-benefits
Pension Income
Bailey Retirement Benefits (Government Pensions): North Carolina may not tax certain retirement benefits received by retirees of North Carolina state and local governments or by United States government retirees, based on the Bailey v. State of North Carolina Supreme Court decision.
Qualifying Bailey retirement benefits:
- Retirement benefits from certain defined benefit plans if the retiree had five or more years of creditable service as of August 12, 1989
- Examples include:
- North Carolina Teachers’ and State Employees’ Retirement System
- North Carolina Local Governmental Employees’ Retirement System
- North Carolina Consolidated Judicial Retirement System
- Federal Employees’ Retirement System
- United States Civil Service Retirement System
- Benefits from state’s §401(k) and §457 plans if the retiree contributed prior to August 12, 1989
Not qualifying for Bailey exemption:
- Local government §457 plans
- §403(b) annuity plans
- Retirement benefits paid to former teachers and state employees of other states
Private Pensions: Private pension income not qualifying under Bailey is generally taxable as ordinary income in North Carolina.
Standard Deduction and Exemptions
| Standard Deduction (Tax Year 2025) | |
|---|---|
| Filing Status | Standard Deduction Amount |
| Single | $12,750 |
| Married Filing Jointly | $25,500 |
| Married Filing Separately (spouse does not itemize) | $12,750 |
| Married Filing Separately (spouse itemizes) | $0 |
| Head of Household | $19,125 |
| Qualifying Widow(er) / Surviving Spouse | $25,500 |
Important Notes:
- There is no additional North Carolina standard deduction for taxpayers who are age 65 or older or blind
- If you are not eligible for the federal standard deduction, your North Carolina standard deduction is zero
- The North Carolina standard deduction amounts differ from federal amounts
North Carolina Itemized Deductions
North Carolina itemized deductions are not identical to federal itemized deductions. Only the following itemized deductions are allowed:
Allowed itemized deductions:
- Qualified home mortgage interest (under IRC section 163(h))
- Real estate property taxes (subject to limitations)
- Charitable contributions (under IRC section 170)
- Medical and dental expenses (exceeding 7.5% of federal AGI)
- Repayment of claim of right income
Limitations:
- The sum of qualified mortgage interest and real estate property taxes may not exceed $20,000
- For married filing separately: $10,000 per spouse (total $20,000 combined)
- Real estate property taxes are further limited to $10,000 for single/head of household/married filing jointly filers, or $5,000 for married filing separately
Not allowed as North Carolina itemized deductions:
- State and local income taxes
- Personal property taxes
- Job expenses and miscellaneous deductions
- Casualty and theft losses
- Other itemized deductions allowed on federal Schedule A
Personal Exemptions
North Carolina does not offer traditional personal exemptions.
However, North Carolina provides a Child Deduction for qualifying children.
Child Deduction
Eligibility: You may claim a deduction for each qualifying child for whom you were allowed a federal child tax credit under IRC section 24.
| Deduction Amounts (Tax Year 2025) | |
|---|---|
| Single / Married Filing Separately | |
| Federal Adjusted Gross Income | Deduction Per Child |
| Up to $20,000 | $3,000 |
| Over $20,000 – Up to $30,000 | $2,500 |
| Over $30,000 – Up to $40,000 | $2,000 |
| Over $40,000 – Up to $50,000 | $1,500 |
| Over $50,000 – Up to $60,000 | $1,000 |
| Over $60,000 – Up to $70,000 | $500 |
| Over $70,000 | $0 |
| Deduction Amounts (Tax Year 2025) | |
|---|---|
| Head of Household | |
| Federal Adjusted Gross Income | Deduction Per Child |
| Up to $30,000 | $3,000 |
| Over $30,000 – Up to $45,000 | $2,500 |
| Over $45,000 – Up to $60,000 | $2,000 |
| Over $60,000 – Up to $75,000 | $1,500 |
| Over $75,000 – Up to $90,000 | $1,000 |
| Over $90,000 – Up to $105,000 | $500 |
| Over $105,000 | $0 |
| Deduction Amounts (Tax Year 2025) | |
|---|---|
| Married Filing Jointly / Qualifying Widow(er) | |
| Federal Adjusted Gross Income | Deduction Per Child |
| Up to $40,000 | $3,000 |
| Over $40,000 – Up to $60,000 | $2,500 |
| Over $60,000 – Up to $80,000 | $2,000 |
| Over $80,000 – Up to $100,000 | $1,500 |
| Over $100,000 – Up to $120,000 | $1,000 |
| Over $120,000 – Up to $140,000 | $500 |
| Over $140,000 | $0 |
North Carolina Income Tax Credits
North Carolina offers the following primary tax credit for individual taxpayers:
Credit for Income Tax Paid to Another State or Country
Eligibility: North Carolina residents may claim a credit for income tax paid to another state or country on income that is also taxed by North Carolina.
Requirements:
- The income must have been derived from sources in the other state or country
- The income must have been taxed under the laws of the other state or country
- You must have been a North Carolina resident when the income was earned
- The credit is limited to the lesser of:
- The net tax paid to the other state or country on the income, OR
- The amount of North Carolina tax attributable to the income taxed by the other state or country
Not eligible for credit:
- Income taxes paid to a city, county, or other political subdivision
- Income taxes paid to the federal government
- Non-residents (this credit is available only to North Carolina residents)
Documentation required:
- Copy of the tax return filed with the other state or country
- Proof of payment (receipt, canceled check, or similar documentation)
- Form D-400TC, Part 1 must be completed
Historic Rehabilitation Tax Credits
Status: Most historic rehabilitation credits have expired or sunset.
Article 3D – Historic Rehabilitation Tax Credits: Expired for qualified rehabilitation expenditures and rehabilitation expenses incurred after January 1, 2023. Taxpayers who qualified before expiration may continue to take remaining installments or carryovers if they continue to meet statutory requirements.
Article 3H – Mill Rehabilitation Tax Credit: Available for rehabilitating historic mill facilities with proper eligibility certification from the State Historic Preservation Officer.
Article 3L – Historic Rehabilitation Tax Credits Investment Program: Replaced Article 3D for qualified rehabilitation expenditures and expenses placed in service during Tax Year 2025. Requires completion of Form NC-Rehab.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
NC Conservation Tax Credit
Effective: Taxable years beginning on or after January 1, 2025, for qualified donations made on or after January 1, 2025
Eligibility: Taxpayers who donate qualified real property interests in perpetuity for conservation purposes to eligible donees may apply for this credit.
Application required: An eligible taxpayer must file an application with the North Carolina Department of Revenue to request the tax credit.
Important: The credit cannot be taken for the year in which the qualified donation is made, but may be taken for the taxable year beginning in the calendar year in which the application for the credit becomes effective.
Expiration: The credit expires for taxable years beginning on or after January 1, 2027, for donations made on or after January 1, 2027.
Source: https://www.ncdor.gov/nc-conservation-tax-credit
Other Tax Credits
North Carolina previously offered various business incentive and energy tax credits. Many of these credits have been repealed or are designated for sunset. Taxpayers who qualified for expired credits may continue to take remaining installments or carryovers if they meet statutory eligibility requirements.
Credits require completion of Form NC-478, Summary of Tax Credits Limited to 50% of Tax, and Form D-400TC.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Filing Deadlines
Regular Deadline
April 15, 2026 for Tax Year 2025 returns
If the due date falls on a Saturday, Sunday, or legal holiday, the return is considered timely filed if filed on the next succeeding day which is not a Saturday, Sunday, or legal holiday.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Extension Deadline
Automatic Federal Extension: If you receive an automatic extension to file a federal individual income tax return, you are granted an automatic state extension to file your North Carolina income tax return. You must fill in the “Federal Extension” circle on page 1 of Form D-400 to receive the automatic state extension.
State Extension (Form D-410): If you did not receive an automatic federal extension, you may request an extension of time to file by filing Form D-410, Application for Extension for Filing Individual Income Tax Return, by the due date of the North Carolina tax return.
Important: An extension of time to file does not extend the time to pay the tax. If you do not pay at least 90% of the tax due by April 15, 2026, you may be charged penalties and interest.
Out of the Country: If you are out of the country on the due date, you are granted an automatic four-month extension to file your North Carolina individual income tax return. “Out of the country” means you live outside the United States and Puerto Rico and your main place of work is outside the United States and Puerto Rico, or you are in military service outside the United States and Puerto Rico.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Estimated Tax Payments
If you have income not subject to withholding, quarterly estimated payments are due:
- Q1 (1st Quarter): April 15, 2026
- Q2 (2nd Quarter): June 15, 2026
- Q3 (3rd Quarter): September 15, 2026
- Q4 (4th Quarter): January 15, 2027
Who must make estimated payments: You are required to pay estimated income tax if the tax shown due on your return, reduced by your North Carolina tax withheld and allowable tax credits, is $1,000 or more.
Payment form: Each payment of estimated income tax must be accompanied by Form NC-40, North Carolina Individual Estimated Income Tax, or you can pay online.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax/estimated-income-tax
Filing Options for North Carolina Income Tax
Online Filing (E-File)
Electronic filing is available through:
North Carolina eServices:
- File and pay online at https://www.ncdor.gov
- File both state and federal returns simultaneously
- Pay by bank draft (no convenience fee) or credit/debit card (MasterCard or Visa with $2 convenience fee per $100 paid)
- Schedule payments up to 365 days in advance
- Choose direct deposit for refunds
- Receive email confirmation when forms and payments are received
IRS-Approved Tax Software:
- TurboTax, H&R Block, TaxAct, and other approved software that supports North Carolina returns
- Visit https://www.ncdor.gov/filing to find approved software providers
Free File Options:
- North Carolina offers free e-filing options for eligible taxpayers
- Visit https://www.ncdor.gov/filing to determine if you qualify
- Certain eligibility requirements apply (typically based on income)
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Paper Filing
Paper forms are available for download and mail filing:
Primary Forms:
- Resident Return: Form D-400, Individual Income Tax Return
- Non-resident/Part-year Return: Form D-400 with Schedule PN
- Instructions: Form D-401, North Carolina Individual Income Tax Instructions
- Download Location: https://www.ncdor.gov/taxes-forms/individual-income-tax
Mailing Addresses:
If you are due a refund:
NC DEPARTMENT OF REVENUE
PO BOX R
RALEIGH, NC 27634-0001If you are not due a refund (with payment):
NC DEPARTMENT OF REVENUE
PO BOX 25000
RALEIGH, NC 27640-0640Important:
- Do not send cash
- Make checks or money orders payable to “North Carolina Department of Revenue”
- Checks must be drawn on a US (domestic) bank with funds payable in US dollars
- Include Form D-400V (payment voucher) with payment
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Tax Preparer Options
Licensed tax professionals familiar with North Carolina tax law include:
- CPA (Certified Public Accountant)
- EA (Enrolled Agent)
- Tax Attorney
- VITA (Volunteer Income Tax Assistance) – Free service for eligible low-income, disabled, or senior taxpayers
- TCE (Tax Counseling for the Elderly) – Free service through AARP Tax-Aide
Free Tax Assistance:
- VITA/TCE: Call 1-800-829-1040 (IRS) for locations and dates
- Certain eligibility requirements apply
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Local Income Taxes
North Carolina does not permit local income taxes.
Only state-level income tax applies. There are no county, city, or municipal income taxes in North Carolina.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax
Special Considerations for North Carolina Income Tax
Remote Workers and Multi-State Taxation
Living in North Carolina, Working for Out-of-State Employer
As a North Carolina resident, you owe North Carolina income tax on ALL income, regardless of where your employer is located.
What this means:
- Employer location does NOT determine tax obligation
- Income from employers in other states is taxable in North Carolina
- North Carolina law requires proper North Carolina tax withholding for resident employees
- You report all income on your North Carolina resident return
Example: A North Carolina resident working remotely for a California company owes North Carolina income tax on that income. The fact that the employer is located in California does not exempt the income from North Carolina taxation.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Working in North Carolina, Living in Another State
Non-residents who perform work IN North Carolina owe North Carolina income tax on income earned from North Carolina sources.
Physical Presence Rule: Income is sourced to North Carolina based on where work is physically performed. If you physically perform services in North Carolina, that income is North Carolina-source income subject to North Carolina taxation.
Filing requirement: Non-residents must file Form D-400 with Schedule PN to report North Carolina-source income and determine the percentage of total income subject to North Carolina tax.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements
⚠️ Interstate Tax Risk Indicator
Remote workers involving North Carolina commonly encounter dual taxation complications with specific states:
Working with these states requires careful planning:
- New York – Applies “convenience of employer” rule, may tax remote work income
- California – Aggressive residency audits for extended work periods, careful residency documentation required
- Pennsylvania – 200+ local income tax jurisdictions, complex withholding requirements
- Connecticut – Complex credit system for taxes paid to other states
- Massachusetts – Telecommuter rule enforcement varies, monitor guidance updates
Multi-state filing considerations: When earning income in multiple states:
- File a resident return in North Carolina reporting all income
- File non-resident returns in other states where income was physically earned
- Claim a credit on North Carolina return (Form D-400TC, Part 1) for taxes paid to other states
“Convenience of the Employer” Rule
North Carolina does not apply a “convenience of the employer” rule.
Non-residents are taxed only on income from work physically performed in North Carolina. If you are a non-resident working remotely from your home state for a North Carolina employer, and you do not physically perform services in North Carolina, that income is not subject to North Carolina income tax.
Source: North Carolina follows the physical presence sourcing rule per G.S. § 105-153.4
Reciprocal Agreements
North Carolina does not have reciprocal agreements with other states.
This means:
- North Carolina residents working in other states may be subject to income tax in both states
- Residents must file a North Carolina return reporting all income
- Residents must file non-resident returns in states where they physically performed services
- North Carolina residents may claim a credit for taxes paid to other states on Form D-400TC
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax
Multi-State Tax Filing
When earning income in multiple states involving North Carolina:
Step 1: File a resident return in North Carolina (Form D-400) reporting all income from all sources
Step 2: File non-resident returns in other states where you physically earned income
Step 3: Claim a credit on your North Carolina return for taxes paid to other states
- Use Form D-400TC, Part 1 – Credit for Income Tax Paid to Another State or Country
- Attach copies of other states’ tax returns
- Attach proof of payment to other states
Credit limitation: The credit is limited to the lesser of:
- The tax paid to the other state, OR
- The North Carolina tax attributable to the income taxed by the other state
Forms required:
- Form D-400TC
- Copies of other states’ tax returns
- Proof of payment (canceled check, receipt, or other documentation)
Tax Residency vs Domicile
Understanding the difference between residency and domicile is critical for determining North Carolina tax obligations.
Domicile Defined
Domicile is your permanent legal home – the place where you intend to return and consider “home” indefinitely.
Key characteristics:
- You can have only ONE domicile at a time
- Domicile continues until you establish a new domicile elsewhere with the intent to remain
- Intent to return is critical – temporary absences do not change domicile
- A mere intent or desire to change domicile is not enough; voluntary and positive action must be taken
Factors establishing domicile in North Carolina:
- Where you maintain your primary residence
- Where you are registered to vote
- Where you obtain your driver’s license
- Where you register your vehicles
- Where your family resides
- Where you maintain bank accounts
- Where you belong to organizations (churches, clubs, civic groups)
- Stated intent in legal documents (wills, trusts)
- Where you claim homestead exemption
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Residency Defined
Residency for North Carolina tax purposes can be established through physical presence even without domicile.
Statutory residency rule: North Carolina applies a 183-day presence test:
- An individual present within North Carolina for more than 183 days during the taxable year is presumed to be a resident
- However, absence from North Carolina for more than 183 days raises no presumption that the individual is not a resident
Important: The 183-day rule creates a presumption of residency if met, but it is rebuttable with convincing proof. Conversely, being absent more than 183 days does not automatically make you a non-resident.
Residency definition: You are a North Carolina resident if:
- You were domiciled in North Carolina at any time during 2025, OR
- You resided in North Carolina during 2025 for other than a temporary or transitory purpose
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
| Critical Differences | ||
|---|---|---|
| Factor | Domicile | Tax Residency |
| Number allowed | One at a time | Can be resident of multiple states |
| Based on | Intent + connections + permanent home | Physical presence + statutory rules |
| Changes when | Establish new permanent home with intent | Meet state's presence threshold or domicile test |
| Tax impact | Owe tax as domiciliary on all income | Owe tax as statutory resident on all income |
Common Conflict Scenarios
Scenario 1: Snowbirds
- Domicile: North Carolina (permanent home, family, voting)
- Winter residence: Florida (5 months/year)
- Tax result: Remain North Carolina resident; domicile unchanged, under 183 days in Florida
Scenario 2: Extended temporary work assignment
- Domicile: North Carolina (permanent home, family)
- Work assignment: New York (8 months, rented apartment)
- Tax result: May be both a North Carolina resident (domicile) and New York statutory resident (presence exceeds threshold), subject to tax in both states with credit for taxes paid to other state
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Burden of Proof
In North Carolina, if the Department of Revenue claims you are a resident and you dispute it, the burden typically falls on the taxpayer to prove non-residency.
Common audit triggers:
- Maintaining North Carolina driver’s license while claiming residency elsewhere
- Owning property in North Carolina while claiming non-residency
- Family remaining in North Carolina while taxpayer works elsewhere
- Day count near or exceeding 183 days
- Voting in North Carolina while claiming residency elsewhere
- North Carolina address on federal return while claiming non-residency
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Multi-State Residency Conflicts
It is possible to be considered a resident of two states simultaneously if each state’s rules independently classify you as resident.
Resolution:
- File resident returns in both states reporting all income
- Claim credit on domicile state return (North Carolina) for taxes paid to statutory resident state
- Use Form D-400TC, Part 1 to claim the credit
- May require professional tax assistance to properly allocate income and credits
Documentation Commonly Requested in Residency Audits
The North Carolina Department of Revenue may audit residency determinations. The following documentation types are commonly requested:
| Primary Residency Evidence | |
|---|---|
| Document Type | What It Shows |
| Driver's License | State of legal residence |
| Voter Registration | Where you exercise voting rights |
| Vehicle Registration | Where vehicles are domiciled |
| Professional Licenses | State of professional domicile |
| Homestead Exemption | Primary residence claim |
| Physical Presence Documentation | |
|---|---|
| Document Type | What It Shows |
| Day-Count Logs | Physical location by day during the year |
| Travel Records | Interstate travel patterns, airline tickets, hotel receipts |
| Credit Card Statements | Geographic spending patterns |
| Cell Phone Records | Location data from carrier |
| E-ZPass / Toll Records | State line crossings, highway usage patterns |
| Work Records | Where services were physically performed |
| Property and Financial Ties | |
|---|---|
| Document Type | What It Shows |
| Property Ownership | Real estate holdings in North Carolina and other states |
| Homestead Exemption | Primary residence claim for property tax purposes |
| Utility Bills | Physical occupancy patterns (electricity, gas, water usage) |
| Lease Agreements | Residence location and duration |
| Bank Statements | Financial institution location, transaction patterns |
| Investment Account Statements | Financial connections to state |
| Social and Family Connections | |
|---|---|
| Document Type | What It Shows |
| Family Location | Where spouse/children reside |
| Medical Records | Where you receive regular medical care |
| Dental Records | Where you receive regular dental care |
| Religious Affiliation | Place of worship attendance |
| Club Memberships | Social/recreational ties (country clubs, gyms, civic organizations) |
| School Records | Where children attend school |
| Employment Documentation | |
|---|---|
| Document Type | What It Shows |
| W-2 Forms | Employer location, state wages reported |
| Employment Contract | Work location requirements, remote work authorization |
| Remote Work Agreement | Authorization to work remotely, work location flexibility |
| Business Records | Where business operations are conducted |
| Intent Documentation | |
|---|---|
| Document Type | What It Shows |
| Will/Estate Documents | Stated domicile for estate purposes |
| Prior Tax Returns | Historical residency claims |
| Insurance Policies | Address on file with insurers |
| Legal Documents | Addresses used in contracts, agreements |
Common patterns that trigger North Carolina residency audits:
- Claiming non-residency while maintaining North Carolina driver’s license
- Owning property in North Carolina while filing as non-resident
- Spouse/children residing in North Carolina while taxpayer claims other domicile
- High-income individuals claiming non-residency
- Day count near 183-day statutory threshold
- Maintaining North Carolina voter registration while claiming non-residency
- Inconsistent addresses across different documents
Burden of Proof: In residency disputes, the burden typically falls on the taxpayer to prove non-residency or domicile elsewhere. Maintain thorough documentation to support your residency claim.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Note: This section provides factual information about documentation types commonly requested. It does not constitute legal or tax advice. Consult with a qualified tax professional for advice specific to your situation.
Military Personnel
Servicemembers Civil Relief Act (SCRA)
Active duty military members stationed in North Carolina due to military orders:
- Do NOT become North Carolina residents solely due to military orders
- Pay income tax to their state of legal residence (domicile)
- Are not subject to North Carolina income tax on military pay
Legal residence determination: Your legal residence as a servicemember is the state you claim as your domicile for military purposes, regardless of where you are stationed.
North Carolina military personnel stationed elsewhere: If you were serving in the United States Armed Forces during Tax Year 2025 and your legal residence was North Carolina, you must file a North Carolina individual income tax return and North Carolina income tax should be withheld from your pay regardless of where you may be stationed.
Non-North Carolina military personnel stationed in North Carolina: If you were a legal resident of another state stationed in North Carolina on military orders, you are not liable for North Carolina income tax on your military pay.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Military Spouses Residency Relief Act (MSRRA)
Spouses of active duty military can maintain their home state residency and are not taxed by North Carolina on income earned in North Carolina if:
All three conditions must be met:
- The servicemember is present in North Carolina solely in compliance with military orders
- The spouse is in North Carolina solely to be with the servicemember
- The spouse is domiciled in the same state as the servicemember
Veterans Benefits and Transition Act of 2018: This Act amended the SCRA to allow the spouse of a servicemember to elect to use the same state of residence as the servicemember for state tax purposes. This election can be made regardless of when or where the taxpayers were married.
Income not subject to North Carolina tax under MSRRA: The income earned for services performed in North Carolina by the spouse of a servicemember who made the residency election is not subject to North Carolina income tax if all three conditions above are met.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Military Retirement Pay
North Carolina fully exempts military retirement pay for qualified servicemembers.
A retired member of the United States Uniformed Services or their eligible beneficiary may deduct the following payments received from the United States government in 2025:
Fully deductible retirement payments:
- Uniformed Service retirement payments received by a retired member who served at least 20 years in the Uniformed Services, OR
- Retirement payments received by a member who was medically retired from the Uniformed Services
- Payments from the Survivor Benefit Plan to a beneficiary of a retired member who served at least 20 years or who was medically retired
Not deductible: Severance payments received by a person due to separation under 10 U.S.C. Chapter 61 are not deductible.
How to claim the deduction: Report military retirement payments on Form D-400 Schedule S, Part B, Line 21. Attach copies of Form 1099-R, Form W-2, or similar official documents showing proof of service.
Important: Retirees of the United States Uniformed Services who deducted retirement income under Bailey (Line 20) may not also deduct the same retirement income on Line 21.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
What Military Members DO Owe Tax On
Military members who ARE North Carolina residents (domicile in North Carolina) owe North Carolina income tax on:
- Non-military income earned in North Carolina or other states
- Investment income (interest, dividends, capital gains)
- Rental income from North Carolina property or property elsewhere
- Business income
- Spouse’s income (if spouse is not covered by MSRRA)
Military members stationed in North Carolina who are NOT North Carolina residents owe North Carolina income tax on:
- Income attributable to ownership of any interest in real or tangible personal property in North Carolina
- Income derived from other employment, business, or trade carried on in North Carolina
- Gambling income from North Carolina activities
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Retirees
Social Security Benefits
North Carolina does not tax Social Security benefits.
All Social Security benefits are fully exempt from North Carolina income tax, including:
- Title 2 Social Security benefits received under the Social Security Act
- Tier 1 railroad retirement benefits received under the Railroad Retirement Act
- Tier 2 railroad retirement benefits
- Railroad unemployment insurance benefits
- Railroad sickness benefits
No deduction is necessary on the North Carolina return because these benefits are excluded from federal adjusted gross income or are deducted on Form D-400 Schedule S.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Pension Income
Bailey Retirement Benefits (State, Local, and Federal Government Pensions):
North Carolina may not tax certain retirement benefits received by retirees of North Carolina state and local governments or by United States government retirees, based on the Bailey v. State of North Carolina Supreme Court decision.
Qualifying Bailey retirement benefits are fully exempt:
State and Local Government Retirement:
- North Carolina Teachers’ and State Employees’ Retirement System
- North Carolina Local Governmental Employees’ Retirement System
- North Carolina Consolidated Judicial Retirement System
- Benefits from state’s §401(k) and §457 plans if the retiree contributed prior to August 12, 1989
Federal Government Retirement:
- Federal Employees’ Retirement System (FERS)
- United States Civil Service Retirement System (CSRS)
- Other federal defined benefit plans
Eligibility requirement: The retiree must have had five or more years of creditable service as of August 12, 1989.
Not qualifying for Bailey exemption:
- Local government §457 plans
- §403(b) annuity plans
- Retirement benefits paid to former teachers and state employees of other states and their political subdivisions
How to claim Bailey deduction: Report the deduction on Form D-400 Schedule S, Part B, Line 20. Attach a copy of Form 1099-R or Form W-2 received from the payer to support the deduction.
Important: Even if all your retirement income is excludable under Bailey, you must still file a North Carolina return if you meet the minimum gross income filing requirements.
Private Pensions:
Private pension income not qualifying under Bailey is taxable as ordinary income in North Carolina.
Military Retirement:
See Military Personnel section above for military retirement pay treatment (fully deductible for qualified servicemembers).
Retirement Account Distributions
401(k) and Traditional IRA Distributions:
Distributions from traditional 401(k) plans and traditional IRAs are generally taxable as ordinary income in North Carolina, unless they qualify for exemption under the Bailey decision (for governmental plans where the retiree had five or more years of service as of August 12, 1989).
Roth IRA and Roth 401(k) Distributions:
Qualified distributions from Roth IRAs and Roth 401(k) accounts are not subject to North Carolina income tax, as they are not included in federal adjusted gross income.
Rollovers:
Rollovers between qualified retirement accounts are generally not taxable if properly executed as direct rollovers.
Bailey retirement account rollovers: If a rollover to a Roth account is from a qualifying tax-exempt Bailey retirement account, the rollover distribution is exempt from state income tax and deductible on the state return to the extent the rollover distribution was included as income on the taxpayer’s federal income tax return.
Students
College students attending school in North Carolina do NOT automatically become residents for tax purposes.
You remain a non-resident if:
- You maintain legal residence (domicile) in another state
- Your presence in North Carolina is temporary for educational purposes
- You intend to return to your home state after graduation
Tax obligations as a non-resident student:
You owe North Carolina tax only on North Carolina-source income:
- Wages earned from working in North Carolina
- Income from any business, trade, or profession carried on in North Carolina
- Income from ownership of real or tangible personal property in North Carolina
You do NOT owe North Carolina tax on:
- Qualified scholarships and fellowships used for tuition, fees, books, and required supplies
- Income earned in your home state (even if attending school in NC)
- Investment income from sources outside North Carolina
Establishing North Carolina residency as a student
Students CAN become North Carolina residents if they take affirmative steps to establish domicile:
Actions that may establish North Carolina residency:
- Register to vote in North Carolina
- Obtain a North Carolina driver’s license (and surrender out-of-state license)
- Purchase property in North Carolina
- Establish a permanent home in North Carolina with intent to remain
- Maintain continuous presence beyond educational purposes
- Accept permanent employment in North Carolina after graduation
Temporary presence does not establish residency:
- Renting an apartment for the school year
- Maintaining a campus address
- Having a North Carolina mailing address
- Working part-time jobs during school
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Part-Year Residents
If you moved TO or FROM North Carolina during 2025, you must file as a part-year resident.
Income Allocation
Part-year residents must:
- Report income earned while a North Carolina resident
- Report North Carolina-source income earned while a non-resident
- Exclude income earned while a resident of another state (unless from North Carolina sources)
- Prorate standard deduction/child deduction based on residency period
Moving TO North Carolina
Residency start date:
- Calculate North Carolina residency start date (the day you establish domicile in North Carolina)
- This is typically the date you move to North Carolina with the intent to remain indefinitely
Income reporting:
- Report all income from all sources from the residency start date forward
- Report North Carolina-source income earned before establishing residency
- File non-resident return in former state for income earned before moving
Example: You moved to North Carolina on July 1, 2025, and established domicile. On your North Carolina part-year resident return, report:
- All income earned July 1 – December 31, 2025 (resident period)
- Any North Carolina-source income earned January 1 – June 30, 2025 (non-resident period)
File a non-resident or part-year resident return in your former state for income earned January 1 – June 30, 2025.
Moving FROM North Carolina
Residency end date:
- Calculate North Carolina residency end date (the day you establish domicile elsewhere)
- This requires both establishing a new domicile AND abandoning North Carolina domicile
Income reporting:
- Report all income from all sources through the residency end date
- Report North Carolina-source income earned after establishing residency elsewhere
- File non-resident or part-year resident return in new state
Example: You moved from North Carolina on September 1, 2025, and established domicile in Virginia. On your North Carolina part-year resident return, report:
- All income earned January 1 – September 1, 2025 (resident period)
- Any North Carolina-source income earned September 2 – December 31, 2025 (non-resident period)
File a part-year resident or non-resident return in Virginia for income earned September 2 – December 31, 2025.
Forms Required
Form D-400 Schedule PN – Part-Year Resident and Nonresident Schedule: You must complete this form to determine what percentage of your total income is from North Carolina sources.
The schedule requires you to:
- Report total income from all sources (Column A)
- Report North Carolina-source income (Column B)
- Calculate taxable percentage (Column B ÷ Column A)
- Apply percentage to North Carolina taxable income
Form required: Form D-400 with Form D-400 Schedule PN attached
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Common Part-Year Resident Scenarios
Scenario 1: College graduate moving to North Carolina for first job
- Former resident of State A (domicile)
- Attended college in State B
- Moved to North Carolina July 1, 2025, for employment
- Tax result: Part-year North Carolina resident starting July 1; file part-year resident return reporting all income from July 1 forward
Scenario 2: Relocated for job, family remained in former state temporarily
- Moved to North Carolina January 15, 2025, for job
- Family remained in former state until June 30, 2025 (selling house, children finishing school year)
- Family joined in North Carolina July 1, 2025
- Tax result: Part-year resident status determination depends on intent and domicile factors; likely established North Carolina domicile when family joined
Scenario 3: Retired and moved to North Carolina
- Retired December 31, 2024
- Moved to North Carolina March 1, 2025
- Established permanent residence with intent to remain
- Tax result: Part-year North Carolina resident starting March 1; report all income from March 1 forward including retirement distributions
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Common Tax Filing Situations
These are factual clarifications based on official North Carolina guidance and tax law.
Situation: “My employer is in another state, so I don’t owe North Carolina tax”
North Carolina law: North Carolina residents owe tax on all income regardless of employer location. Employer location does not determine tax obligation. If you are a North Carolina resident, you must report and pay North Carolina income tax on income from all sources, including wages paid by out-of-state employers.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Situation: “I work remotely full-time, so I don’t owe tax anywhere”
Tax law principle: All income is taxable in at least one jurisdiction. Remote work does not exempt income from taxation. As a North Carolina resident, you owe North Carolina income tax on your remote work income regardless of where your employer is located.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Situation: “I’m a part-year resident, so I owe half the tax”
North Carolina law: Part-year residents owe tax only on income earned during the North Carolina residency period plus North Carolina-source income earned during the non-residency period, not a simple 50% reduction. The actual tax depends on when you established or abandoned North Carolina residency and the sources of your income.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Situation: “I don’t need to file because I had no North Carolina withholding”
North Carolina law: Filing requirements are based on gross income thresholds, not withholding. If your gross income exceeds the threshold for your filing status ($12,750 single, $25,500 married filing jointly, $19,125 head of household), you must file a North Carolina return even if you had no North Carolina withholding.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements
Situation: “I only lived in North Carolina for a few months, so I don’t need to file”
North Carolina law: Part-year residents must file if they had income while a North Carolina resident or received North Carolina-source income while a non-resident, and their total gross income exceeds the filing threshold for their filing status. The length of residency does not eliminate the filing requirement.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Situation: “I’m retired and all my income is Social Security, so I don’t need to file”
North Carolina law: While Social Security benefits are not taxable in North Carolina, if you have other income that causes your total gross income to exceed the filing threshold, you must file a return. Additionally, if you had North Carolina income tax withheld, you should file to claim a refund.
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements
Situation: “I can claim the federal standard deduction amount on my North Carolina return”
North Carolina law: North Carolina standard deduction amounts are different from federal amounts. You must use North Carolina’s standard deduction amounts: $12,750 (single), $25,500 (married filing jointly), $19,125 (head of household). Do not use federal standard deduction amounts on your North Carolina return.
Forms & Publications
Primary Tax Return Forms
Resident return:
- Form: D-400, Individual Income Tax Return
- Instructions: Form D-401, North Carolina Individual Income Tax Instructions
- Download: https://www.ncdor.gov/taxes-forms/individual-income-tax
Non-resident/part-year return:
- Form: D-400 with Schedule PN, Part-Year Resident and Nonresident Schedule
- Instructions: Included in Form D-401
- Download: https://www.ncdor.gov/taxes-forms/individual-income-tax
Common Schedules
- Adjustments for Individuals: Form D-400 Schedule S (additions and deductions from federal AGI)
- Itemized Deductions: Form D-400 Schedule A
- Part-Year/Nonresident Schedule: Form D-400 Schedule PN
- Other Additions/Deductions: Form D-400 Schedule PN-1 (for part-year/nonresidents)
- Tax Credits: Form D-400TC
- Amended Returns: Form D-400 Schedule AM
Withholding Forms
- Employee Withholding Certificate: Form NC-4 or Form NC-4 EZ (North Carolina equivalent to federal W-4)
- Nonresident Alien Withholding: Form NC-4 NRA
- Employer Withholding Tables: Available at https://www.ncdor.gov/income-tax-withholding-tables-and-instructions-employers/open
Other Important Forms
- Estimated Tax: Form NC-40, North Carolina Individual Estimated Income Tax
- Extension Application: Form D-410, Application for Extension for Filing Individual Income Tax Return
- Payment Voucher: Form D-400V, Individual Income Tax Payment Voucher
- Amended Payment Voucher: Form D-400V Amended
- Net Operating Loss: Form NC-NOL, Net Operating Loss Worksheet
- Summary of Tax Credits: Form NC-478, Summary of Tax Credits Limited to 50% of Tax
- Historic Rehabilitation Credits: Form NC-Rehab, Historic Rehabilitation Tax Credits
Key Publications
- Individual Income Tax Instructions: Form D-401 (comprehensive instruction booklet)
- Personal Taxes Bulletin: Detailed guidance on individual income tax provisions (https://www.ncdor.gov/2024-personal-taxes-bulletin/open)
- Corporate Income, Franchise, and Insurance Tax Bulletin: For business tax information
Where to Submit Paper Returns
With refund expected:
NC DEPARTMENT OF REVENUE
PO BOX R
RALEIGH, NC 27634-0001With payment due:
NC DEPARTMENT OF REVENUE
PO BOX 25000
RALEIGH, NC 27640-0640Note: Include Form D-400V (payment voucher) with any payment
Source: https://www.ncdor.gov/taxes-forms/individual-income-tax
Penalties and Interest
Late Filing Penalty
North Carolina imposes a penalty of 5% per month (up to 25% maximum) on unpaid tax if the return is filed late without a valid extension.
The penalty is calculated as 5% of the net tax due for each month, or part of a month, the return is late.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open (G.S. § 105-236(a))
Late Payment Penalty
North Carolina imposes a penalty of 5% of the net tax due if the return is filed after the due date with a balance due, regardless of how late the tax is paid.
Exception: If you received an extension to file your North Carolina individual income tax return and you paid at least 90% of the tax due by the original due date (April 15, 2026), you will not be automatically penalized for late payment. The remaining balance, including interest, must be paid with the return on or before the extended due date to avoid the late payment penalty.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open (G.S. § 105-236(a))
Interest on Unpaid Tax
Interest accrues on unpaid tax from the due date of the return until the tax is paid, whether or not an extension was granted.
Current rate: The interest rate on underpayments is established semiannually by the Secretary of Revenue and can be found at https://www.ncdor.gov
Calculation: Interest is computed at the applicable statutory rate from the due date to the date of payment.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open (G.S. § 105-241.21)
Underpayment of Estimated Tax Penalty
If you are self-employed or have income not subject to withholding, you may owe a penalty for underpaying estimated taxes.
You may owe this penalty if:
- The total tax shown due on your 2025 North Carolina return minus tax credits and North Carolina income tax withholding is $1,000 or more, AND
- You did not pay sufficient estimated taxes throughout the year
Safe harbor provisions: You will not owe interest on underpayment of estimated tax if:
- You had no tax liability in 2024, OR
- Your 2025 tax liability minus credits and withholding is less than $1,000
Form to determine penalty: Complete Form D-422, Underpayment of Estimated Tax by Individuals, to calculate the interest due.
Exceptions:
- Farmers and Fishermen: If at least two-thirds of your gross income for the year came from farming or fishing, and you file your return and pay your tax in full by March 1, 2026, you do not owe interest.
- Annualized Income: If your income varied during the year, you may be able to reduce or eliminate the penalty by completing Form D-422A, Annualized Income Installment Worksheet.
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open (G.S. § 105-163.15)
Collection Assistance Fee
Any tax, penalty, and interest not paid within 60 days after a Notice of Collection is mailed will be assessed a 20% collection assistance fee.
The fee does not apply if:
- The tax debt is paid in full before the fee is assessed, OR
- An installment payment agreement is established with the Department before the fee is assessed
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Information Verification Log
Official North Carolina Income Tax Resources
All information on this page is compiled exclusively from official government sources.
North Carolina Department of Revenue
- Main Website: https://www.ncdor.gov
- Individual Income Tax: https://www.ncdor.gov/taxes-forms/individual-income-tax
- Tax Forms: https://www.ncdor.gov/taxes-forms/individual-income-tax
- Tax Rate Schedules: https://www.ncdor.gov/taxes-forms/individual-income-tax/tax-rate-schedules
- Filing Information: https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements
- Online Filing Portal (eServices): https://www.ncdor.gov (File and Pay option)
- Standard Deduction Information: https://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/north-carolina-standard-deduction-or-north-carolina-itemized-deductions
- Tax Credits: https://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/credit-income-tax-paid-another-state-or-country
- Bailey Retirement Benefits: https://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/bailey-decision-concerning-federal-state-and-local-retirement-benefits
- Withholding Information: https://www.ncdor.gov/income-tax-withholding-tables-and-instructions-employers/open
- Bulletins and Directives: https://www.ncdor.gov/documents/bulletins
- Estimated Tax: https://www.ncdor.gov/taxes-forms/individual-income-tax/estimated-income-tax
North Carolina General Statutes (Tax Code)
- Chapter 105 – Taxation: https://www.ncleg.gov/Laws/GeneralStatuteSections/Chapter105
- Article 4 – Income Tax: Individual income tax provisions (G.S. § 105-153.3 through § 105-153.10)
- Session Law 2023-134: Current rate structure authorization
- Legislative Updates: https://www.ncleg.gov
Contact Information
Customer Service:
- Phone: 1-877-252-3052 (toll-free)
- Hours: 7:00 AM to 4:30 PM Eastern Time, Monday through Friday
- Mailing Address:
NC DEPARTMENT OF REVENUE
PO BOX 25000
RALEIGH, NC 27640-0100Automated Refund Inquiry:
- Phone: 1-877-252-4052 (toll-free)
- Available: 24 hours a day, 7 days a week
- Information needed: Social Security number and refund amount
Tax Fraud Hotline:
- Phone: 1-800-232-4939
- Hours: 8:00 AM to 5:00 PM, Monday through Friday
Office of the Taxpayer Advocate
The Office of the Taxpayer Advocate was established by the Secretary of Revenue to help ensure the Department enforces the state’s tax laws in an impartial, consistent, secure, and efficient manner.
When to contact:
- You have attempted to resolve your issue through normal administrative channels
- A Departmental response has not been provided by the date promised or required by law
- You believe instructions provided were incorrect and caused confusion or hardship
- You have a reoccurring issue not resolved through normal channels
How to contact:
- Form: Complete Form NC-TA (available at https://www.ncdor.gov)
- Phone: 1-919-715-2080
Source: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
Free Tax Assistance
VITA (Volunteer Income Tax Assistance):
- Free tax preparation for eligible taxpayers
- Find locations: Call IRS at 1-800-829-1040 or visit https://www.irs.gov
- Certain income and eligibility requirements apply
TCE (Tax Counseling for the Elderly):
- Free tax preparation for seniors
- Find locations: Call IRS at 1-800-829-1040 or visit https://www.irs.gov
AARP Tax-Aide:
- Free tax preparation for seniors and low-to-moderate income taxpayers
- Find locations: Visit https://www.aarp.org/money/taxes/aarp_taxaide/
Where to Check for Updates
Current Tax Rate Tables:
- https://www.ncdor.gov/taxes-forms/individual-income-tax/tax-rate-schedules
- Updated when legislative changes occur
Forms Library:
- https://www.ncdor.gov/taxes-forms/individual-income-tax
- Forms available starting January each year for the prior tax year
Legislative Changes:
- North Carolina General Assembly Tax Committee: https://www.ncleg.gov
- NCDOR Important Notices: https://www.ncdor.gov
Administrative Guidance:
- Tax Bulletins: https://www.ncdor.gov/documents/bulletins
- Directives: Published as needed for significant tax law changes
- Important Notices: https://www.ncdor.gov (homepage announcements)
Federal Conformity Updates:
- Important Notice: Impact of Federal Law on NC Individual and Corporate Income Tax Returns
- https://www.ncdor.gov/important-notice-impact-federal-law-north-carolina-individual-and-corporate-income-tax-returns-tax
- Updated as federal tax law changes occur
Taxpayer Information:
- NCDOR Homepage: https://www.ncdor.gov
- Individual Income Tax Page: https://www.ncdor.gov/taxes-forms/individual-income-tax
Email Subscription: Sign up for NCDOR e-alerts at https://www.ncdor.gov to receive important North Carolina tax information directly.
Note: This page will be reviewed and updated in January 2027 for Tax Year 2026. For real-time updates, always consult the official North Carolina Department of Revenue website.
Tax Glossary
Adjusted Gross Income (AGI): Total income minus specific deductions (e.g., IRA contributions, student loan interest). For North Carolina purposes, AGI is based on the Internal Revenue Code as of January 1, 2023, which may differ from current federal AGI.
Taxable Income: For North Carolina, taxable income is calculated as federal adjusted gross income plus North Carolina additions minus North Carolina deductions (Schedule S), minus the standard deduction or itemized deductions, minus the child deduction.
Resident: An individual who is domiciled in North Carolina or who resides in North Carolina for other than a temporary or transitory purpose. A person present in North Carolina for more than 183 days during the taxable year is presumed to be a resident.
Non-Resident: An individual who does not meet North Carolina’s residency requirements but earns income from North Carolina sources.
Part-Year Resident: An individual who moved into or out of North Carolina during the tax year.
Domicile: Your permanent legal home – the place you intend to return to indefinitely. You can have only one domicile at a time.
Withholding: Tax deducted from your paycheck by your employer and sent to the state on your behalf.
Reciprocity: Agreement between states where residents working across state lines pay tax only to their state of residence. North Carolina does not have reciprocal agreements with other states.
Tax Credit: Dollar-for-dollar reduction in tax owed (e.g., $500 credit reduces tax by $500).
Tax Deduction: Reduces taxable income (e.g., $500 deduction reduces taxable income by $500, saving approximately $21.25 in tax at the 4.25% rate).
Filing Status: Category determining filing requirements and standard deduction (Single, Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Widow(er)/Surviving Spouse).
Standard Deduction: Fixed dollar amount subtracted from income before calculating tax. Alternative to itemizing deductions. North Carolina amounts differ from federal.
Bailey Retirement Benefits: Certain government retirement benefits exempt from North Carolina taxation based on the Bailey v. State of North Carolina Supreme Court decision.
Flat Tax Rate: North Carolina uses a single tax rate (4.25% for Tax Year 2025) that applies to all taxable income, regardless of income level or filing status.
Update History
This section documents all material changes to North Carolina income tax information on this page.
February 2026 – Initial Publication (Tax Year 2025)
- Published comprehensive North Carolina income tax guide for Tax Year 2025 (returns filed in 2026)
- Tax rate: 4.25% flat rate
- Standard deductions: $12,750 (single), $25,500 (married filing jointly), $19,125 (head of household)
- Filing thresholds documented
- All sections verified from official North Carolina Department of Revenue sources
- Important Notice regarding federal law impact on Tax Year 2025 returns documented
- North Carolina references Internal Revenue Code as of January 1, 2023
Sources Verified:
- Tax Rate: https://www.ncdor.gov/taxes-forms/individual-income-tax/tax-rate-schedules
- Forms and Instructions: https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open
- Filing Requirements: https://www.ncdor.gov/taxes-forms/individual-income-tax/individual-income-filing-requirements
- Standard Deduction: https://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/north-carolina-standard-deduction-or-north-carolina-itemized-deductions
- Bailey Benefits: https://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/bailey-decision-concerning-federal-state-and-local-retirement-benefits
- Tax Credits: https://www.ncdor.gov/taxes-forms/individual-income-tax/filing-topics/credit-income-tax-paid-another-state-or-country
- Federal Conformity: https://www.ncdor.gov/important-notice-impact-federal-law-north-carolina-individual-and-corporate-income-tax-returns-tax
Verification Schedule:
- Annual Update: January (new tax rates, standard deductions, filing thresholds)
- Mid-Year Review: As needed (legislative changes, federal conformity updates)
- Continuous Monitoring: Emergency tax legislation, important notices, disaster relief
- Source Link Check: Quarterly (all .gov URLs verified functional)
Last comprehensive update: February 12, 2026
Next scheduled review: January 2027 (for Tax Year 2026 information)
Future Rate Change Note: Session Law 2023-134 provides that for taxable years beginning after 2025, the North Carolina individual income tax rate will be 3.99%. Additional rate changes may apply to tax years beginning with 2027 based on certain rate reduction triggers. Monitor https://www.ncdor.gov for updates.