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New Tax Changes In 2014 In North Carolina

RALEIGH, N.C. Significant changes made to the North Carolina tax laws approved this summer and taking effect starting Jan. 1, unless otherwise noted:


INDIVIDUAL INCOME TAX:


Eliminates the current three-bracket rates of 6, 7 and 7.75 percent with one bracket with a 5.8 percent rate in 2014. The rate falls to 5.75 percent in 2015.


Eliminates personal exemptions, but increases standard deduction currently ranging from $3,000 to $6,000 depending on filing status from $7,500 to $15,000.


Eliminates $4,000 deduction on government retirement income and $2,000 on private retirement income. Social Security and some government income remain exempt from taxes.


Limits itemized deductions originating from mortgage interest and property taxes combined to $20,000. All charitable contributions allowed by federal law can still be deducted.


Raises child tax credit from $100 per child to $125 for tax filers with lower adjusted gross incomes, such as up to $40,000 for married couples filing jointly. The $100 credit is still eliminated for people with high incomes.


Eliminates a $50,000 deduction on certain business-related income.


Repeals a deduction of up to $2,500 for a single taxpayer and $5,000 for a married couple to give to a child through North Carolina's college savings plan. Account earnings remain exempt from federal and state income tax.


CORPORATE INCOME TAX:


Reduces current rate of 6.9 percent to 6 percent in 2014 and 5 percent in 2015. It could fall further in 2016 and 2017 if revenue growth targets are met.


SALES TAX:


Remains at current combined state and local rate, which is 6.75 percent in most counties and slightly higher in others.


Expands to include service contracts.


Taxes manufactured homes (currently 2 percent or $300 maximum) and modular homes (2.5 percent) at full 4.75 percent state sales tax rate.


Repeals exemptions for nutritional supplements sold by chiropractors, certain newspaper sales and food prepared for university dining halls.


Replaces 3 percent gross receipts tax for live sporting and entertainment events with the combined state and local sales tax rate, with exceptions for certain arts festivals, agricultural fairs and school events.


Replaces 1 percent gross receipts tax on movie tickets with the combined state and local sales tax rate.


Changes the tax on electricity come July 1, which could result in higher bills for consumers.


OTHER TAXES:


Repeals the estate tax for people who died on or after Jan. 1, 2013.


Caps the state motor fuels, or gasoline tax at 37.5 cents per gallon through June 30, 2015.


In separate legislation, the General Assembly allowed the state's portion of the earned income tax credit for the working poor to expire.


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Source: Fiscal Research Division, North Carolina General Assembly, House Bill 998.


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