North Carolina's Governor signed historic tax reform legislation on July 23, 2013. The legislation impacts corporate income taxes and personal income taxes starting with the 2014 tax year.
Personal income taxes will no longer have graduated personal income tax rates ranging from 6% to 7.75%. There will be a flat tax rate of 5.8% for 2014 and 5.75% for years after 2014. In addition to the rate changes, multiple changes have been made to the calculation of the personal income tax starting in 2014, including increases in standard deductions, repeal of personal exemptions, and multiple changes to addition and subtraction adjustments.
Corporate income tax rates are also reduced starting in 2014 to 6% from 6.9%. The rate will go down again in 2015 to 5% and to 4% in 2016. For years after 2016, the rate will be decreased to 3% (provided that certain revenue targets are met).
On a positive note for tax credits, the "technology development" credit is now called the "research and development" credit. The credit also got extended for 2 years through 2015. On a negative note for tax credits, several personal tax credits were repealed.
Please review the bill for all of the details at NC HB 998.