📅 2026 Update: Recent Changes in North Carolina Tax Law

Since the original article was published, several significant updates have occurred in tax laws relevant to North Carolina. These changes impact how certain entities are taxed, particularly with the introduction of Pass-Through Entity Taxes (PTET) in various states, including North Carolina. This update will outline these recent changes and their implications for taxpayers.

📊 New Tax Legislation in North Carolina

In November 2021, North Carolina enacted a Pass-Through Entity Tax (PTET) similar to the one in Illinois. This tax allows certain businesses to pay taxes at the entity level. As of 2026, this law continues to be relevant for partnerships and S-corporations operating in the state.

🏢 Other States Following Suit

North Carolina is not alone in introducing PTETs. Other states, like Hawaii, Iowa, and Kentucky, have also adopted similar taxes since 2023. This trend reflects a growing shift in tax policy across the country, impacting how businesses report and pay taxes.

📄 Forms and Filing Requirements

Taxpayers in North Carolina must be aware of specific forms related to the PTET. For example, partnerships should file Form 1065 to report their income and deductions. The tax obligations for pass-through entities may differ from previous years, so staying updated is essential.

⏳ Processing Times and Deadlines

Processing times for tax forms can vary. For example, Form 3911, used to trace refunds, has different timelines depending on the IRS center. Taxpayers should be attentive to deadlines, such as submitting Form 8716 by the due date of the return for which an extension is requested.

📌 Key Points to Remember

  • 🔹 North Carolina's PTET was enacted in November 2021.
  • 🔹 Similar taxes have been introduced in multiple states since 2023.
  • 🔹 Partnerships must file Form 1065 for tax reporting.
  • 🔹 Processing times for forms can vary significantly.
  • 🔹 Attention to deadlines is crucial for tax compliance.

💡 Tips for Navigating North Carolina Taxes

It is important to review your personal tax situation with your attorney. Each taxpayer's circumstances can significantly impact their tax obligations.

📑 Understand the PTET

Familiarize yourself with how the Pass-Through Entity Tax (PTET) impacts your business. This understanding can help you make informed financial decisions and ensure compliance with state laws.

📅 Keep Track of Filing Deadlines

Mark your calendar with important tax deadlines. Missing these dates can lead to penalties or missed opportunities for tax benefits.

📄 Utilize Available Forms

Make sure to use the correct forms when filing your taxes. For partnerships, Form 1065 is necessary for reporting income and deductions.

💻 Access Free Tax Help

Consider using free resources for tax filing. Programs like Volunteer Income Tax Assistance (VITA) offer free help to those who qualify, which can reduce filing costs.

📊 Stay Updated on Changes

Tax laws can change frequently. Staying informed through reliable sources will help you adapt to any new requirements and avoid issues with compliance.

🏆 Services Ranked by User Reviews (2026)

This section highlights various tax services relevant to North Carolina taxpayers. These services provide assistance with tax preparation, filing, and resolution. The order is based on Trustpilot data checked in October 2026.

Remember that scores can fluctuate, and online reviews should be considered alongside personal experiences.

🥇 1. Jackson Hewitt Tax Service

Jackson Hewitt Tax Service holds a Trustpilot score of 4.2. The service is known for its extensive tax preparation services and nationwide locations, making it accessible for many. However, some reviewers mention concerns about customer service responsiveness which may affect the overall experience.

🥈 2. KBO Tax & Accounting Services

KBO Tax & Accounting Services has a Trustpilot score of 4.5. It is recognized for its nationwide tax preparation and bookkeeping services, catering to a wide audience. Nevertheless, the limited number of in-person office locations can be a drawback for those seeking face-to-face consultations.

🥉 3. Advanta Tax

With a Trustpilot rating of 4.3, Advanta Tax is known for its nationwide tax services, including assistance with IRS resolution and state tax debt. While many clients appreciate their services, some report delays in service that could be a concern for urgent tax matters.

4️⃣ TaxSlayer

TaxSlayer has a Trustpilot score of 4.0. This service is recognized for its affordable online tax preparation software, making it a budget-friendly option for many taxpayers. However, users occasionally report issues with software glitches, which can hinder the filing process.

5️⃣ SMAART Tax

SMAART Tax holds a Trustpilot score of 4.4. It provides virtual tax services across all 50 states, appealing to those who prefer online assistance. However, the focus on virtual services means there are limited in-person consultations available for clients who need them.

🆓 Free Tax Help Options

Several free options are available for taxpayers needing assistance. Services like IRS Free File and Volunteer Income Tax Assistance (VITA) offer support for eligible individuals, particularly those who may struggle with tax filing. These resources can significantly ease the burden during tax season.

🔎 Factors to Compare When Choosing a Tax Service

  • 🔍 Trustpilot scores and review counts.
  • 🔍 Services offered, including online vs. in-person assistance.
  • 🔍 Customer service responsiveness and support quality.
  • 🔍 Knowledge of specific tax laws relevant to your state.
  • 🔍 Availability of free or low-cost options.

❓ Frequently Asked Questions

❓ What is the Pass-Through Entity Tax in North Carolina?

The Pass-Through Entity Tax (PTET) allows certain businesses, like partnerships and S-corporations, to pay taxes at the entity level. This tax was enacted in North Carolina in November 2021.

🕒 How do I file for an extension on my taxes?

To request an automatic extension for certain business returns, file Form 8716 with the appropriate IRS center based on your location. Make sure to submit this form by the due date of your return.

💰 Can I get help with my taxes for free?

Yes, programs like VITA and Tax Counseling for the Elderly (TCE) offer free tax assistance for those who qualify. These resources can be beneficial for low-income individuals and seniors.

📜 What forms do partnerships need to file?

Partnerships must file Form 1065 with the IRS to report their income, deductions, and other information. This form is essential for compliance with federal tax regulations.

📅 What are the deadlines for tax forms?

Deadlines vary by form. For example, Form 1065 is typically due on the 15th day of the 3rd month after the end of the partnership's tax year. It's important to mark these dates on your calendar.

💼 How can I stay updated on tax law changes?

To stay informed about tax laws, regularly check the IRS website and your state's tax agency website. Following news releases can also help you keep track of any important updates.

⚖️ Recent Cases Affecting Tax Laws

Recent court rulings have impacted tax laws and regulations, including those in North Carolina. These decisions can shape how taxpayers interact with state and federal tax systems.

To explore more recent rulings, check more rulings on the news page.

End of October 2026 Update





FULL List to North Carolina Tax Forms

Individual Income Tax Forms


Form D-400 Individual Income Tax Return Form D-400TC Individual Income Tax Return

Corporate Income Tax Forms


Form CD-405 C Corporation Tax Return Form CD-401S S Corporation Tax Return

Sales Tax Forms


Exemption Form Sales and Use Tax E-Filing Services

Property Tax Forms


Form AV-12 Application for Business Property Tax Exemption Form AV-10 Property Tax Exemption or Exclusion Form AV-9 Application for Property Tax Relief

Primary Concerns:


The economic story in North Carolina is really the tale of two economies: rural North Carolina and urban (or suburban) North Carolina.  Due to the dismantling of the state's industrial infrastructure, with one in five industrial jobs having been outsourced international to countries such as China.  Predominantly amongst these have been the state's textile industry and furniture manufacturing agencies, which have mostly closed down, causing many to lose their jobs.  Also, many of the state's agriculture is now been consolidated by corporate concerns, which has drastically cut the number of sole proprietorship farms in the state.  All of this has halted and regressed the growth of rural North Carolina, which has seen its population decline with many of those remaining having very low incomes.

Urban North Carolina is an altogether different story, with state capital Charlotte and major cities such as Greensboro and Raleigh seeing dramatic economic growth in their financial and technological sectors, causing an increase in per capita income, rising populations, and a higher standard of living.

The discrepancy has caused levels of taxation to be split dramatically, with property taxes in some suburban areas of North Carolina being double and even triple what they are in some rural areas.  North Carolina, like all states, is facing a harsh economic climate, which has threatened the solvency of the state's budget.  As a result, the state has incurred some criticism for staggering the rate of return on many refund checks to taxpayers in order to maintain enough liquidity on hand to pay its creditors.

As North Carolina looks towards the future, one of the most pressing problems it will face is how it will managed to better stabilize the imbalance between its under-performing rural sector and over-performing urban sector, hopefully not at the expense of the urban sector's prosperity.  Without doing so, North Carolina's ability to maximize its tax revenue to combat its financial problems may prove to be severely hampered.

Income Taxes:


Every individual in North Carolina who earns an income in the state and resides there full or part time is liable for income tax, as is anyone who draws an income from within the state.  While North Carolina has very precise tax tables, they are generally based, for single filers, on a progressive rate with staggered rates over a select few brackets.

For individuals making $21,250 or less, their rate is 6%.  Between $21,250 and $100,000 the tax is $1,275 plus 7% rate of income over $21,250.  Between $100,000 and $200,000 the rate is $6,437 plus 7.75% of excess income over $100,000.  Over $200,000 the tax is $14,187 plus 8.25% of excess over the base.  Married couples and heads of household have more complex brackets, but most are at the same rates of taxation.

Corporate Income Taxes:


Any business that draws income from or resides within North Carolina is liable for state corporate income tax.  Because North Carolina has a large agricultural base, the tax laws are specifically written to include companies who operate agricultural industries in the state but are headquartered elsewhere.  The definition of a corporation in North Carolina's terms extends to just about any form of commercial endeavor, including partnerships.

The corporate income tax rate in North Carolina is a flat 6.9%.

North Carolina also has also collected a Corporate Franchise Tax that 0.15% (or $1.50 of every $1000), and is derived from whichever of three income bases of a corporation is the greatest: their capital income, property investment, or 55% of the property value.

Property Taxes:


Property taxes in North Carolina are derived from all form of tangible and intangible property, and includes real property, personal property, and motor vehicle property.

Property tax rates have high variability in North Carolina, with more rural counties have rates as low as 0.2% which more urban areas can have property rates as high as 0.8 to 0.9%.

All property assessments are done on the country level by a county assessor.  All real property is assessed at its market value while motor vehicle is valued at its rate of depreciation based on its age against its worth when it was brand new.  Personal property is valued based on its replacement value, or how much it would cost to replace the item in question.

Sales Taxes:


The base North Carolina sales tax is 5.75%, with most states adding a 2% surplus sales tax.  The state standard is generally 7.75%, though some states have 8% and one county in particular, Mecklenburg, the state's most populous county, has a sales tax of 8.25%.

While unprepared food and prescription drug sales, many counties implement an additional 2 to 3% food tax.  The state's cigarette tax, about $0.45 per pack is among the lowest in the nation.

Tax Refund Problems:


In 2010, for the second year in a row, North Carolina's state government staggered their tax refunds to taxpayers due to budget difficulties.  By holding on to refund checks the state hopes to have enough cash on hand to handle bill payments through the end of its fiscal year.  This has led to some frustration from taxpayers, more and more of whom have begun to use electronic filing software with the benefit of returning refunds more quickly than if they were filed by mail.  Now electronic refunds are presently taking a month or more while those who filed paper returns are can expect their tax refund to take over three months.  Contact North Carolina lawyers for legal advice and assistance.

Introduction


The North Carolina tax system is a complex network of taxes and regulations that help generate revenue for the state. North Carolina has a progressive income tax system, meaning that the more money you earn, the higher your tax rate. Additionally, the state has a sales tax, property tax, and other taxes and fees on various goods and services. In this article, we will explore the various taxes in North Carolina, how they are levied, and how they affect residents and businesses in the state.

North Carolina State Income Tax


The North Carolina state income tax is a progressive income tax system. The state has a flat tax rate of 5.25% on taxable income, with a tax-free personal exemption of $10,000 for single taxpayers and $20,000 for married taxpayers filing jointly. North Carolina’s income tax brackets are as follows:

- For taxable income below $21,450, the tax rate is 5.25%

- For taxable income from $21,450 to $107,000, the tax rate is 5.5%
- For taxable income from $107,000 to $613,350, the tax rate is 5.75%
- For taxable income above $613,350, the tax rate is 5.99%

As you can see, the tax rate increases as income increases. This means that people who earn more money pay a higher percentage of their income in taxes than people who earn less. The North Carolina income tax is one of the primary sources of revenue for the state, generating $12.4 billion in FY 2019-2020.

Sales Tax in North Carolina


The North Carolina sales tax is a 4.75% tax on the retail sale of tangible personal property and certain services. Counties and municipalities can add to this rate, with the maximum sales tax rate in the state being 7.5%. Some items, such as prescription drugs and most groceries, are exempt from the sales tax.

Additionally, some services are also subject to sales tax in North Carolina. For example, if you have a repairman come to your home to fix your air conditioning, you will likely pay sales tax on the labor and equipment used to complete the repair.

The sales tax is an important source of revenue for local governments in North Carolina. In FY 2019-2020, the state collected $3.9 billion in sales tax revenue.

Property Tax in North Carolina


The property tax is a tax on real property, such as land, buildings, and homes. Property tax rates in North Carolina are set by local governments, and the tax is based on the assessed value of the property. The state’s property tax rate is just $0.761 per $100 of assessed value, making it one of the lowest property tax rates in the nation.

However, some counties and municipalities can add to this tax rate. For example, Mecklenburg County has a property tax rate of $0.848 per $100, while Wake County has a slightly lower rate of $0.621 per $100. Property taxes are an important source of revenue for local governments, providing funding for schools, police and fire departments, and other public services.

Other Taxes and Fees in North Carolina


In addition to the taxes mentioned above, North Carolina also levies taxes and fees on various items and services. Here are a few examples:

- Excise Tax on Motor Fuels – This tax is a per-gallon tax on motor fuels, including gasoline and diesel fuel. The tax rate is currently set at 36.2 cents per gallon for gasoline and 36.9 cents per gallon for diesel fuel.
- Alcoholic Beverage Tax – This tax is imposed on the sale of alcoholic beverages in North Carolina. The tax rate varies depending on the type of alcoholic beverage being sold.
- Insurance Premiums Tax – This tax is a percentage of insurance premiums paid by residents and businesses in North Carolina. The tax rate varies depending on the type of insurance policy being purchased.
- Highway Use Tax – This tax is a one-time tax on the sale or transfer of a motor vehicle in North Carolina. The tax rate is 3% of the purchase price of the vehicle.

How Taxes Affect Residents and Businesses


Taxes have a significant impact on residents and businesses in North Carolina. For residents, taxes can affect their purchasing power, disposable income, and overall financial stability. For businesses, taxes can affect their profitability, competitiveness, and ability to create jobs and expand.

One way taxes affect residents is by reducing their disposable income. When taxes are levied on goods and services, it becomes more expensive for residents to purchase these items. This can lead to reduced spending and lower economic growth.

Individuals and businesses also need to factor taxes into their financial planning. For example, a high-income earner may choose to invest in tax-advantaged retirement accounts to reduce their tax liability. A business may choose to locate in a tax-friendly state to take advantage of lower tax rates and incentives.

On the other hand, taxes also provide necessary funding for government services such as healthcare, education, infrastructure, and public safety. It is important to strike a balance between generating revenue through taxes and ensuring that the tax burden is fair and equitable.

Recent Changes to North Carolina Tax Laws


North Carolina tax laws are subject to change, with lawmakers frequently proposing and enacting new tax legislation. Here are a few recent changes to North Carolina tax laws:

- In 2019, North Carolina repealed the estate tax, which was a tax on the transfer of property upon the death of the owner. The tax had been in place since 1921, and its repeal was estimated to save North Carolinians $52 million per year.
- In 2020, North Carolina expanded the sales tax to include certain digital property and services, such as music streaming and video game downloads. The change was estimated to generate $63.7 million in new revenue.
- In 2021, North Carolina increased the standard deduction for individual income tax filers. For the 2021 tax year, the standard deduction for single filers is $12,750, while the standard deduction for married filers is $21,500.

Conclusion


The North Carolina tax system is a complex network of taxes and regulations that help generate revenue for the state. The state has a progressive income tax system, a sales tax, a property tax, and other taxes and fees on various goods and services. Taxes have a significant impact on both residents and businesses, affecting their purchasing power, disposable income, and financial planning. Recent changes to North Carolina tax laws include the repeal of the estate tax and the expansion of the sales tax to include certain digital property and services. It is important to strike a balance between generating revenue through taxes and ensuring that the tax burden is fair and equitable.