(Raleigh) – Income tax rates for North Carolina families fell on New Year’s Day and the state’s zero-tax bracket also increased, reforms that save low-income workers a larger share of their liability.
The state’s personal income tax rate fell from 5.49% to 5.25% in 2019. The standard deduction, or ‘zero tax bracket,’ for families filing jointly increases from $17,500 to $20,000, or from $8,750 to $10,000 for individuals.
North Carolina’s corporate tax rate fell from 3% to 2.5%, the lowest rate levied in the nation, amid major economic reforms that have jumpstarted the state’s job and wage growth, consistently delivered revenue surpluses, and helped the state save a record $2 billion rainy day reserve in 2018.
After the higher zero-tax bracket takes effect, an estimated 1.5 million working North Carolinians will be exempt from state income taxes according to the state’s Department of Revenue. That’s nearly 30% of all income tax returns filed in the state each year.
The state’s Department of Revenue agency estimated 354,326 working adults will be removed from the income tax rolls by 2019 as a result of Republican-led tax relief this decade, a 23% increase in North Carolinians whose earnings are completely exempt from state income tax.
“Families being able to save or spend their money instead of having it taxed away improves their quality of life and helps North Carolina’s overall economy,” Speaker Moore said. “Our priority is to provide maximum tax reductions for those who need it most.”
“Long-term relief and revenue reform continue to produce top-tier job growth and an unemployment rate below the national average in our state, a winning combination for North Carolina families and businesses.”
The lower personal income tax rate will save North Carolinians an estimated $380 million in the 2018-19 fiscal year, another $780 million in the 2019-2020 fiscal year, and more than $810 million in the 2020-2021 fiscal year, according to the state’s Fiscal Research Division.
North Carolina’s economy added nearly 100,000 jobs in 2018 – one of the highest growth rates the state has ever had – and rural areas saw the fastest growth following previous phases of tax relief this decade.