RALEIGH, WAKE COUNTY (WTVD) -

Republican legislative leaders and GOP Governor Pat McCrory said Monday they've reached an agreement on tax reform.

At a news conference Monday afternoon, McCrory called it a "meaningful" and "historic" deal that will spur economic development and put money into the pockets of North Carolina taxpayers.

The deal still has to be approved by the full General Assembly and signed into law by the governor.

Highlights of the overhaul:

   
INDIVIDUAL INCOME TAX:
   
- Eliminate the current three-bracket rates of 6, 7 and 7.75 percent with one bracket with a 5.8 percent rate in 2014 and 5.75 percent in 2015.
   
- Eliminate personal exemptions, but increase standard deduction - currently ranging from $3,000 to $6,000 depending of filing status - from $7,500 to $15,000.
   
- Eliminate $4,000 deduction on government retirement income and $2,000 private retirement income.
   
- Allow the greater of the standard deduction or itemized deductions equal to mortgage interest and property taxes capped at $20,000, plus all charitable contributions allowed by federal tax law.
   
- Raise child tax credit from $100 per child to $125 for tax filers with adjusted gross income below $40,000. The $100 credit would still be eliminated for people with high incomes.
   
- Eliminate in 2014 a $50,000 deduction on certain business-related income approved in 2011.
   
CORPORATE INCOME TAX:

   
- Reduce current rate of 6.9 percent to 6 percent in 2014 and 5 percent in 2015. It could fall to 4 percent in 2016 and 3 percent in 2017 if revenue growth targets are met.
   
SALES TAX:
   
Effective Jan. 1, 2014:
   
- Expand to include service contracts.
   
- Tax manufactured homes (2 percent or $300 maximum) and modular homes (2.5 percent) at full 4.75 percent state sales tax rate.
   
- Repeal exemptions for nutritional supplements sold by chiropractors and certain newspaper sales.
   
Effective July 1, 2014:
   
- Repeal current 3 percent franchise tax on electricity sales, replacing it with 6.75 percent combined state and local sales tax rate.
   
- Make piped natural gas subject to combined rate of 7 percent, end excise tax.
   
- Repeal sales tax holiday weekend in August and Energy Star appliance sales tax holiday weekend in November.
   
- Cap sales tax refunds for individual nonprofit hospitals, universities and other charities to $45 million annually.
   
OTHER TAXES:
   
- Extend tax credits for research and development, professional motorsports teams and aviation fuel for the teams and passenger air carriers until 2016. Other tax credits would expire as scheduled over time. The film production tax credit, for example, would expire in 2015.
   
- Repeal estate tax.
   
REVENUE:

   
The plan is projected to result in $86.6 million less in state revenues during the 2013-14 fiscal year and $437.8 million less in 2014-15 compared to revenue levels if no tax changes were made. The amount extends to more than $600 million annually through mid-2018. Local governments combined would receive $14.6 million in additional revenue in 2013-14 and $36.2 million in 2014-15.
   
WHAT'S NOT CHANGED:
   
- Social Security income won't be taxed differently.
   
- Other services transactions, such as lawn services, automobile repairs, alterations and many business transactions will continue to be exempt from the sales tax.

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Source: Fiscal Research Division, North Carolina General Assembly.

For more information, visit WTVD.