North Carolina Proposes Income Tax Rate Changes

North Carolina Gov. Roy Cooper’s budget for fiscal year 2018-19 proposes to:

  • freeze the corporate income tax rate;
  • reduce the personal income tax rate on income below a certain threshold;
  • increase the standard deduction for individuals; and
  • conform to certain federal tax changes resulting from the Tax Cuts and Jobs Act (TCJA).

What is the proposed corporate income tax rate freeze?

The corporate income tax rate is scheduled to decrease from 3% to 2.5% for tax years beginning after 2018. The budget proposes to freeze the rate at 3%.

What is the proposed personal income tax rate reduction?

The flat personal income tax rate is scheduled to decrease from 5.499% to 5.25% for tax years beginning after 2018. The budget proposes to reduce the personal income rate to 5.25% on income up to:

  • $200,000 for married taxpayers filing jointly;
  • $150,000 for heads of households; and
  • $100,000 for single taxpayers.

The rate would remain at 5.499% for income above those thresholds.

What is the proposed standard deduction increase?

The budget proposes to increase the standard deduction for individuals to:

  • $20,000 for married taxpayers filing jointly;
  • $15,000 for heads of households; and
  • $10,000 for single taxpayers.

The standard deduction is scheduled to increase to those amounts for tax years beginning after 2018.

What is the proposed TCJA conformity?

The budget does not propose any specific TCJA provisions that North Carolina should or should not adopt.

News, Office of North Carolina Gov. Roy Cooper, May 10, 2018

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