RALEIGH, WAKE COUNTY - Gov. Pat McCrory has signed into law a package of tax cuts worth $524 million over the next two years.
Gov. McCrory signed the bill into law on Tuesday, after the General Assembly approved it last week. The legislation will reduce individual and corporate income tax rates, and adjust slightly which transactions are subject to the sales tax.
Most changes will take place in January 2014 and July 2014, although the repeal of North Carolina's estate tax begins this year.
Highlights of the bill are detailed below:
Personal Income Tax:
- 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.
Corporate Income Tax:
- 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 there is additional tax revenue growth 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 death tax;
- Preserves the sales tax refund for nonprofits.
Gov. McCrory released the following statement after signing the bill into law:
"I came to the governor's office a few short months ago with a sense of urgency and resolve to put North Carolinians back to work. I firmly believe that this reform package will prove to be critically important to growing North Carolina's economy and getting people back to work.
"This tax reform package puts more money in families' budgets and will restore confidence for North Carolina businesses. Because of this package, job creators will think about relocating to our great state."