North Carolina’s 3.99% flat rate
North Carolina taxes all income, including capital gains, at a flat 3.99% for 2026. A $40,000 increase in North Carolina taxable income adds $1,596 before credits; there is no lower rate for long-term holdings.
Later cuts depend on revenue triggers written into the statute, starting with the 2027 rate, so they do not change a 2026 sale. North Carolina starts from federal AGI, which means the federal home-sale exclusion carries through. Retirees who qualify under the Bailey settlement can exclude certain government pension income, but that exclusion does not extend to investment gains.
| Parameter | Value | Effective | Primary source |
|---|---|---|---|
| Individual income tax rate | 3.99% of North Carolina taxable income | Taxable years beginning after 2025 | G.S. 105-153.7(a) |
| Prior-year rate | 4.25% | Taxable years beginning in 2025 | G.S. 105-153.7(a) |
| First revenue trigger | If FY 2025–2026 General Fund revenue exceeds $33,042,000,000, the rate drops by 0.5 point, never below 2.49% | Taxable years beginning in 2027 | G.S. 105-153.7(a1) |
| Standard deduction | $12,750 single or married filing separately; $19,125 head of household; $25,500 married filing jointly or surviving spouse | Current statute | G.S. 105-153.5(a)(1) |
North Carolina’s 2026 rate is separate from future triggers
North Carolina General Statutes §105-153.7 sets the individual income-tax rate at 3.99% for taxable years after 2025. The same section includes revenue-trigger provisions for later years, beginning with the 2027 rate. A future conditional reduction should not be substituted for the 2026 rate used on this page.
The percentage applies to North Carolina taxable income under the state’s definitions. Federal gain, federal AGI and federal ordinary taxable income are distinct amounts; the state return can contain adjustments and deductions before reaching its taxable-income base. The federal 0% capital-gain band does not automatically imply zero North Carolina tax.
For confirmed prepared North Carolina taxable-income amounts, the base option calculates 3.99% before credits in each scenario. A $25,000 increase in that prepared base produces a $997.50 difference before credits. Use the final-liability option if credits, sourcing or other return effects change. Keep the current rate clause and state reconciliation with the calculation rather than labeling a gross-gain multiplication as a complete return.
The first later trigger compares fiscal-year 2025–2026 General Fund revenue with $33.042 billion for the 2027 rate. The statute refers to the final accounting reported in August and limits reductions using its prescribed floor. This is a future-rate determination, not an alternative calculation for a 2026 sale.
North Carolina preparation checklist
- 2026 rate clause rather than future revenue trigger
- North Carolina taxable-income preparation
- Credits and source allocation beyond the base worksheet