✅ Quick Answer: North Carolina’s individual income tax rate is 4.25% for 2025. It’s set to drop again to 3.99% in 2026. This reduction benefits high earners, retirees, and business owners with proactive tax planning.

If you’re a North Carolina resident or planning a move here, the state’s recent income tax changes could affect how much you pay—and how you plan.

📘 Need help with tax notices, credits, or deadlines? Visit our North Carolina Tax Help Center for quick answers and expert guidance.

Here’s everything you need to know about North Carolina’s tax rate in 2025, how it’s changing in the future, and what it means for your wallet.

✅ North Carolina’s Income Tax Rate in 2025

As of January 1, 2025, the individual income tax rate in North Carolina is 4.25%.

Year Tax Rate
2023 4.75%
2024 4.50%
2025 4.25%
2026 3.99% (planned)

This rate applies to most types of personal income, including:

  • Wages and salaries

  • Self-employment income

  • Retirement distributions (with some exceptions)

  • Capital gains and dividends

✅ Who Benefits Most from the Rate Drop?

While everyone in NC will pay less in 2025, the biggest benefit often goes to:

  • High earners in cities like Charlotte, Huntersville, or Lake Norman

  • Small business owners and contractors with pass-through income

  • Retirees withdrawing large IRA or pension amounts

Proactive tax planning helps these groups time income, maximize deductions, and structure their finances to take full advantage of lower rates.

📌 Explore our proactive tax planning services for NC residents »

✅ What’s Happening in 2026?

North Carolina is phasing in a flat 3.99% rate by 2026, with additional cuts proposed in future legislation. These changes aim to make NC more attractive for:

  • Entrepreneurs and remote workers

  • Retirees relocating from higher-tax states

  • Growing families looking for long-term savings

📌 Get our breakdown of the tax law changes »

✅ Why This Matters for Tax Planning

Even a small rate cut can make a big difference with:

  • Bonus income or RSUs

  • Capital gains from property or investments

  • Retirement distributions (especially QCDs or RMDs)

We help NC residents plan:

  • When to take distributions

  • Whether to convert to a Roth IRA now or wait

  • If income deferral strategies are worth it this year vs. next

📌 See how tax projections help time income to reduce your total tax bill »

✅ Local Examples: Who’s Impacted in NC

  • A Charlotte couple earning $400K saves $1,000+ with the new rate

  • A Lake Norman business owner shifting income to 2026 pays less on retained earnings

  • A Huntersville retiree planning RMDs gets clarity on timing

Final Thoughts: Don’t Let Lower Rates Catch You Off Guard

Lower tax rates are a win—but they don’t replace smart strategy. At Polaris, we help North Carolina residents turn these changes into real savings through personalized planning.

📅 Schedule a 1-on-1 tax review today

We’ll help you:

  • Understand how these changes affect you

  • Adjust withholdings or quarterly payments

  • Create a tax-smart plan for 2025 and beyond