New income tax rate in NC for 2026. What you’ll pay and how much it’s dropped
AI-generated summary reviewed by our newsroom.
- New rates: North Carolina income tax is 4.25% for 2025 and 3.99% for 2026.
- Triggers tie further cuts to revenue; exceeding $33 billion would lower rate to 3.49%.
- Budget impasse stems from House–Senate dispute over the pace and scope of cuts.
The new year also rings in a new tax rate in North Carolina.
Here’s what you need to know about what the lower tax rate on personal income means for you and the status of future tax relief.
New NC income tax rate in 2026
For the 2026 taxable year, the individual income tax rate drops to 3.99%.
If you’re filing personal income taxes for the 2025 tax year, the rate is 4.25%.
The corporate income tax rate also drops Jan. 1. The new corporate income tax rate for 2026 is 2.25%, a drop from 2.5%.
Why the 2027 tax rate is already being debated
The Republican-controlled General Assembly set future individual income tax cuts, beyond the 3.99% for 2026, to be triggered by state revenue collections.
Under the current triggers, if revenue in this current 2025-26 fiscal year exceeds $33 billion, according to the legislature’s Fiscal Research Division, the tax rate would drop to 3.49% in 2027.
But this past year, the House’s version of the budget bill called for adjusting those triggers, with House Republican budget writers concerned that cutting taxes too fast is a bad idea. The House plan to slow future cuts gained support from a majority of House Democrats.
Senate Republicans disagreed, saying that adjusting those triggers would amount to a tax increase, because future tax cut reductions would change. House Republicans dispute that, noting that there is no tax increase, just slower tax cuts.
In a nutshell, that’s why North Carolina was the only state that didn’t pass a budget in 2025. Republicans at the top of the House and Senate — Senate leader Phil Berger and House Speaker Destin Hall — haven’t been able to reach agreement.
Democratic Gov. Josh Stein wants to freeze tax cuts altogether.
What were NC income tax rates for the past decade?
Before 2014, the individual income tax rate depended on a household’s income, but Republicans did away with those tiers and set a single, flat rate after they gained control of the legislature in 2011.
Reducing tax rates have been a Republican priority ever since.
That’s why each recent year has begun with a new, lower rate.
Here is the recent history of your income tax rates, according to the N.C. Department of Revenue.
- 2024 tax rate: 4.5%
- 2023 tax rate: 4.75%
- 2022 tax rate: 4.99%
- 2021 tax rate: 5.25%
- 2020 tax rate: 5.25%
- 2019 tax rate: 5.25%
- 2018 tax rate: 5.49%
- 2017 tax rate: 5.49%
- 2016 tax rate: 5.75%
- 2015 tax rate: 5.75%
- 2014 tax rate: 5.8%
