Governor Pat McCrory, along with House Speaker Thom Tills (R-Mecklenburg) and Senate President Pro Tempore Phil Berger (R-Rockingham), announced a compromise on tax reform early this week. The legislation passed both the House and Senate today and will be sent to the Governor for signature.
- Reduces and simplifies the 3-tiered state personal income tax from the current maximum rate of 7.75% and minimum rate of 6% to 5.8% in 2014 and 5.75% in 2015.
- Increases the standard deduction for all taxpayers, applied to the:
- First $15,000 of income for those married filing jointly
- First $12,000 of income for heads of household
- First $7,500 of income for single filers.
- Retains the state child tax credit and increases it for families making less than $40,000.
- Offers a $20,000 combined maximum deduction for mortgage interest and property taxes.
- Makes charitable contributions fully deductible.
- Protects all Social Security income from state taxes.
- Reduces the corporate income tax from 6.9% to 6% in 2014 and then to 5% in 2015 a 29% rate reduction.
- If the state meets revenue targets (i.e. if tax revenue grows due to a growing economy), the corporate income tax will drop to 4% in 2016 and 3% in 2017.
- Caps the state gas tax.
- Eliminates North Carolina’s estate tax.
- Preserves the sales tax refund for nonprofits.