New NC Tax Changes In 2014
RALEIGH, N.C. (AP) — Significant changes made to the 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.
— 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.
— 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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