North Carolina now has a fixed state income tax rate of 5.25%. The effective average property tax rate for the state is below the national average. There is a state sales tax and each county applies an additional tax. A financial advisor in North Carolina can help you understand how taxes fit your overall financial goals.
In fact, a common theme in these accolades before tax reform was that there were several other important attributes that North Carolina brings to the table, such as a technology-ready workforce, world-class universities, quality of life, and a friendly business regulatory environment. In addition to that state rate, each North Carolina county collects a separate sales tax, ranging from 2% to 2.25% in most counties. The new law introduced a fixed-rate income tax and more than doubled the standard deduction for North Carolina taxpayers. Many North Carolina counties collect property taxes at an effective rate (taxes paid as a percentage of home value) of less than 1%, bringing the state's average effective property tax rate to 0.77%, which is below the national average.
In fact, it is the individual income tax that increases more than half of all tax collections in North Carolina. Poole College of Management adjunct professor of accounting Nathan Goldman explains the impact for North Carolina corporations. Under North Carolina law, anyone who “possesses an unauthorized substance, such as marijuana, cocaine, moonshine, mashed potatoes and illicit mixed drinks, will have the substances confiscated and then must pay an excise tax within 48 hours. North Carolina has a state sales tax rate of 4.75 percent, a maximum local sales tax rate of 2.75 percent, and a combined average state and local sales tax rate of 6.98 percent.
Therefore, North Carolina will emerge from this change as one of the most competitive states for corporations in the United States when it comes to collecting corporate taxes. Consequently, if North Carolina continues to incorporate startups and their employees due to the state's favorable business tax environment, then lost tax collections of a 0% corporate income tax rate could be overshadowed by increased tax revenues from a greater number of people who pay individual income taxes. In fact, the Tax Foundation estimates that North Carolina will eventually become the first best state when it comes to corporate tax collection and the fifth best state overall in the ranking of the Tax Foundation's State Business Tax Climate Index, a compilation of corporate properties, individual, sales and unemployment insurance taxes. Each state's tax code is a multifaceted system with many moving parts, and North Carolina is no exception.