Article
6 min read
North Carolina Income Tax Guide for Payroll Managers
US payroll
Author
Shannon Ongaro
Last Update
November 18, 2025
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Key takeaways
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North Carolina has a flat individual income tax of 4.25% for taxable years beginning January 1, 2025.
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Employers must comply with North Carolina Department of Revenue (NCDOR) rules for withholding, unemployment insurance (UI), and payroll reporting.
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Deel Payroll helps streamline compliance by automating tax-rate updates, filings, and payments across all 50 states and beyond.
As of 2025, there are fourteen US states with a single-rate (or flat) income tax. This includes North Carolina, which enacted a flat state income tax rate in 2014.
Although a flat income tax rate simplifies calculations, there’s still plenty payroll managers and employers need to know to get North Carolina income tax right for their employees. This includes residency rules, filing and reporting requirements, and deductions.
This article outlines the basics of what employers in North Carolina need to know about the state’s income tax rules and their impact on payroll.
How income tax works in North Carolina
North Carolina administers a flat income tax, simplifying the rate structure but still requiring careful handling of deductions, residency, and taxable wage calculations.
For taxable years beginning January 1, 2025, the income tax rate in North Carolina is 4.25%. After 2025, the North Carolina individual income tax rate will drop to 3.99%.
Residency rules and filing status
Residency determines how income is taxed in North Carolina:
- Residents: Taxed on all income
- Part-year residents: Taxed on income earned while domiciled in North Carolina
- Nonresidents: Taxed only on North Carolina-source income
In North Carolina, filing statuses include single, married filing jointly, married filing separately, head of household, and qualifying surviving spouse. These classifications influence deductions and credits.
For remote or relocating workers, employers must update state withholding and ensure registration in the correct jurisdiction as soon as work location or residency changes.
North Carolina income tax deductions and credits
Because North Carolina levies a personal income tax, employees may qualify for:
- A standard deduction based on filing status
- Itemized deductions, calculated under state-specific rules
- Certain state tax credits, including for dependent care or earned income eligibility
Employers should ensure employees submit accurate withholding certificates so payroll calculations reflect the appropriate allowances.
Filing and payment details
For individuals
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Form: D-400 Individual Income Tax Return
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Deadline: April 15, 2026, for the 2025 tax year (unless extended)
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How to file: Electronic filing through NCDOR systems or by mail
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Estimated tax payments: Form D-400ES
For employers
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Register with NCDOR for withholding accounts.
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Withhold taxes at the state’s flat 4.25% rate for wages paid in 2025
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File quarterly withholding returns and remit payments per NCDOR requirements
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Report all new hires through the North Carolina New Hire Reporting Program
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Maintain complete wage and tax records for both federal and state compliance reviews
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Other employer-related taxes
| Tax Type | Applies To | Rate / Details (2025) | Administered By |
|---|---|---|---|
| Sales and use tax | Consumers and businesses | 4.75% + local add-ons | NCDOR |
| Property tax | Property owners | Varies by locality | Local governments |
| Unemployment Insurance (UI) | Employers | Wage base and rates vary by experience | Division of Unemployment Insurance |
| Corporate income and franchise tax | All corporations chartered in North Carolina or doing business in North Carolina, unless they are specifically exempt from tax under G.S. 105-130.11. | 2.25% | NCDOR |
What employers should know about North Carolina taxes
Payroll implications
Although North Carolina has a simplified flat income tax rate, it’s scheduled to decrease in the coming years. As a payroll manager, you’ll have to update your payroll systems to reflect these changes as they occur. To calculate the correct state income tax deductions before applying the flat rate, use information from the employee’s NC-4 form.
Multi-state and remote work considerations
North Carolina taxes income where it is earned. Employers with distributed teams must determine when an employee’s income becomes North Carolina-sourced and adjust withholding promptly. Registration for additional state accounts may be required when work locations shift.
Learn more: State Tax Reciprocity: Filing Your Taxes Made Easy
Business obligations
North Carolina requires adherence to UI contributions, state tax registrations, and accurate sales and use tax reporting where applicable. Even though no local income tax applies, local jurisdictions still administer key business taxes such as property assessments.
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Simplify North Carolina payroll with Deel
Payroll operations in North Carolina require consistent attention to the state’s flat income tax rate, UI requirements, reporting rules, and multi-jurisdiction considerations. These factors can create complexity for growing teams—particularly those managing remote workers or expanding into new markets.
Deel Payroll automates the core compliance tasks that matter most: accurate withholding, up-to-date tax calculations, and payments. For broader HR and compliance coverage, Deel PEO provides comprehensive support across all 50 states.
Simplify multi-state payroll and compliance with Deel Payroll—built to deliver accuracy, efficiency, and complete regulatory confidence. Book a demo to see the platform in action and speak with an expert.
FAQs
Is North Carolina getting rid of state income tax?
No, North Carolina is not eliminating its personal income tax. According to the state’s tax rate schedule, the individual income tax rate is set at 4.25% for taxable years beginning in 2025, and will reduce to 3.99% for taxable years after 2025 (subject to triggers). While there is a multi-year reduction plan in place, there is no current law eliminating the personal income tax entirely.
Is North Carolina a tax-friendly state?
Yes, in many respects, North Carolina is considered relatively tax-friendly compared to states with high progressive income tax rates. Key points:
- The flat individual income tax rate is modest by US standards and applies uniformly to all taxable income.
- The state is actively reducing that rate over time, which signals a pro-growth, competitive tax policy.
- There are no local city- or county-level income taxes in North Carolina, simplifying the state income tax picture.
That said, “tax-friendly” depends on the full tax burden (state + local + sales + property + business taxes). North Carolina still has sales taxes, property taxes, and other employer/business tax obligations.
Is North Carolina’s income tax high?
Given its flat rate of 4.25% for 2025, North Carolina’s income tax is not high relative to many states with top marginal rates well above 8-10%.
How much is $100,000 a year after taxes in North Carolina?
Exact take-home pay depends on filing status, deductions, pre-tax withholdings (401(k), HSA, etc.), and federal tax liability. After state income tax ~$3,700, and factoring in federal and payroll taxes, someone earning $100,000 might expect to take home in the $70,000-$80,000 range under typical assumptions.
Use Deel’s Take-Home Pay Calculator for a more detailed estimate.
Disclaimer: This content is for general informational purposes only and does not constitute tax or legal advice. Tax laws and rates are subject to change. Please verify current information with official sources, and consult a licensed tax professional for personalized guidance.
Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.
