If you reside in the Tar Heel State, expect to pay a North Carolina capital gains tax if your income is above a certain amount. It’s part of the state’s flat tax on most income.
North Carolina allows individuals to pay a "flat" capital gains tax rate on their assets. Unlike the federal government, which imposed short and long-term capital gains based on the amount of time an asset was held, the state of North Carolina maintains a single 5.499% capital gains tax on all profits derived from capital assets.
North Carolina Capital Gains Tax
Capital gains taxes are taxes imposed on profits derived from capital assets. That may include the sale of a business, shares of stock or mutual funds, artworks, antiques and similar assets. Long-term capital gains are for those assets sold after holding them for at least one year, while short-term capital gains taxes are imposed on assets held less than one year. However, those are how capital gains are taxed on the federal level. In North Carolina, both long- and short-term capital gains are taxed at a flat rate.
Other North Carolina Taxes
In addition to a flat rate on income, North Carolina charges various other taxes. The North Carolina sales tax rate is 4.75 percent, but many items, including electricity, piped natural gas, liquor, telecommunications services and video programming are taxed at a 7 percent rate. Counties may impose their own sales and use taxes, making the overall rate higher. If you buy property in North Carolina, you may prove subject to the North Carolina real estate sales tax, also known as the excise tax. While the state excise tax is 0.2 percent, seven counties, consisting of Camden, Chowan, Currituck, Dare, Pasquotank, Perquimans and Washington, may levy an optional local real estate sales tax of up to 1 percent.
North Carolina Individual Income Tax 2018
North Carolina’s individual income tax rate for 2018 is 5.499 percent. Calculating your state taxes is easy. Simply multiply your taxable income by this percentage to come up with the amount owed. The federal capital gains tax rate changes for 2018 under the Tax Cuts and Jobs Act for long-term capital gains is zero, 15 and 20 percent. Single filers with an adjusted gross income of up to $38,700, heads of households with an adjusted gross income of up to $51,700 and married couples filing jointly with an adjusted gross income of up to $77,200 pay no capital gains taxes. Those with an adjusted gross income of $38,601 through $425,800 for single filers, $51,701 through $452,401 for heads of households and $77,201 through $479,000 for married couples filing jointly pay 15 percent in capital gains taxes. Those with an adjusted gross income above those amounts pay 20 percent in capital gains taxes. Short-term capital gains are taxed as ordinary income, but those tax brackets have changed under the new tax law, ranging from 10 to 37 percent.
North Carolina Individual Income Tax 2017
For 2017, the North Carolina standard deduction has increased for taxpayers. The amount is $8,750 for single filers, $14,000 for a head of household and $17,500 for married couples filing jointly. The individual income tax rate is 5.499 percent, a reduction from 5.75 percent in 2016. The 2017 federal long-term capital gains tax rates are zero for those in the 10 or 15 percent tax bracket, or less than $35,350 for single filers and $70,700 if married filing jointly. The capital gains tax rate is 15 percent for taxpayers in the 25, 28, 33 and 35 percent tax brackets, climbing to 20 percent for those in the 39.6 percent bracket. That top bracket starts at $418,400 for single filers and $470,700 for married couples filing jointly.
- North Carolina Department of Revenue: Tax Rate Schedules
- Tax Policy Center: How are capital gains taxed?
- North Carolina Department of Revenue: Individual Income Tax
- North Carolina Department of Revenue: Sales and Use Tax Rates & Other Information
- National Council of State Legislatures: Real Estate Transfer Taxes
- MarketWatch: Your Simple Guide to the New Capital Gains Tax Rates
- Internal Revenue Service. "Publication 544 (2018): Sales and Other Dispositions of Assets," Page 20.
- Internal Revenue Service. "Topic No. 409 Capital Gains and Losses." Accessed Feb. 13, 2020.
- Internal Revenue Service. "IRS provides tax inflation adustments for tax year 2020."
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.