Your Take-Home Pay
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Per paycheck
Detailed Breakdown
Gross Annual Salary
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Federal Income Tax
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North Carolina State Tax (4.5%)
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Social Security (6.2%)
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Medicare (1.45%)
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Annual Take-Home
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Future Savings (When rate drops to 3.99%)
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North Carolina's Decreasing Income Tax
North Carolina has one of the most taxpayer-friendly trends in America: a continuously decreasing flat income tax. The state reduced its rate from 4.75% to 4.5% in 2024 and has already scheduled further reductions to 3.99% by 2026, with potential to drop even lower if revenue targets are met.
Tax Rate History & Future
Recent Rate Reductions:
- 2023: 4.75% flat tax
- 2024: 4.5% flat tax (0.25% decrease)
- 2026: 3.99% scheduled (additional 0.51% decrease)
- Potential: Could reach 2.49% if revenue triggers are met
This means a North Carolina taxpayer earning $75,000 will see their state tax drop from $3,563 (2023) to $3,375 (2024) to $2,993 (2026) - a total savings of $570 annually, or $5,700 over 10 years!
Why North Carolina Keeps Cutting Taxes
North Carolina's tax reform began in 2013 when the state switched from a progressive system (rates up to 7.75%) to a flat tax. The state has prioritized economic growth and competitiveness, successfully attracting businesses and residents from higher-tax states while maintaining strong revenue through economic expansion.
Results of tax reform:
- Population growth: 1.3 million new residents (2010-2024)
- Business relocation: Major companies moved from CA, NY, NJ
- Strong state revenues despite lower rates (Laffer curve in action)
- Ranked #2 for business climate by Site Selection magazine
No Tax on Social Security
North Carolina does not tax Social Security benefits. Combined with the low flat tax rate, this makes NC extremely attractive for retirees. A retiree with $40,000 in Social Security and $50,000 in pension/401(k) withdrawals pays only 4.5% on the $50,000 ($2,250) - far less than most states.
Military-Friendly State
North Carolina is one of the most military-friendly states in America. Military retirement pay is completely exempt from state income tax. This includes:
- Active duty military pay (stationed in NC)
- Military retirement pensions (100% exempt)
- VA disability benefits (exempt)
- Survivor benefits (exempt)
Combined with Fort Bragg (Fort Liberty), Camp Lejeune, and multiple military installations, NC is home to over 750,000 veterans who benefit from these tax breaks.
Research Triangle: Tech Hub with Low Taxes
Raleigh-Durham-Chapel Hill Economic Powerhouse
The Research Triangle Park (RTP) is one of the largest research parks in the world, home to over 300 companies employing 55,000+ people. This concentration of technology, pharmaceutical, and research companies creates a thriving economy with high-paying jobs and low state taxes.
Major employers in RTP:
- Apple (3,000 employees, expanding)
- Cisco Systems
- IBM
- Biogen
- Credit Suisse
- Fidelity Investments
- Red Hat (IBM subsidiary)
Tech worker example ($120,000 salary):
- NC state tax: $5,400 (4.5%)
- California state tax: ~$8,400 (7% effective)
- Annual savings: $3,000
- Plus: Housing costs 50-60% less than Silicon Valley
Charlotte Banking Hub
Charlotte is the second-largest banking center in the United States after New York City, headquarters to Bank of America and major operations for Wells Fargo, Truist, and others.
Finance professional example ($150,000 salary):
- NC state tax: $6,750 (4.5%)
- NY state + NYC tax: ~$14,000 (combined 9.3%)
- Annual savings in NC: $7,250
- Cost of living also 30-40% lower than NYC
Frequently Asked Questions
What is North Carolina's current income tax rate?
4.5% flat tax as of 2024. This applies to all income regardless of amount - simple and predictable.
When will the tax rate decrease to 3.99%?
By 2026. The rate reduction is already scheduled in state law. If you earn $75,000, you'll save an additional $383 annually when this takes effect.
Could the rate go even lower?
Yes! North Carolina law includes triggers that could reduce the rate further to 2.49% if state revenue targets are consistently met. The trend is clearly toward lower taxes.
Does North Carolina tax Social Security?
No. Social Security benefits are 100% exempt from NC state income tax, making North Carolina very retirement-friendly.
Is military retirement pay taxed?
No. Military retirement pay is completely exempt from North Carolina state income tax. This makes NC one of the best states for military retirees.
Are there local income taxes in NC?
No. North Carolina's 4.5% is the only income tax you pay. No counties or cities levy additional income taxes.
How does NC compare to South Carolina?
NC is more tax-friendly. South Carolina has a progressive tax with a top rate of 7% (applies to income over ~$16,000), while NC's flat 4.5% beats that for middle and high earners. On $100,000, SC charges about $7,000 vs. NC's $4,500 - a $2,500 difference.
How does NC compare to Virginia?
Virginia has progressive rates from 2% to 5.75%. For income over $17,000, Virginia's rate climbs. On $100,000, Virginia charges about $5,300 vs. NC's $4,500 - NC saves $800 annually.
What about property taxes?
North Carolina property taxes are reasonable, averaging 0.77% of home value statewide. On a $350,000 home, expect about $2,695/year - much less than New Jersey (2.5%), Illinois (2.3%), or Texas (1.8%).
Is this calculator accurate?
Very accurate. We use official 2024 IRS tax brackets and North Carolina's current 4.5% flat tax rate. The calculator also shows estimated future savings when the rate drops to 3.99%.