North Carolina State Income Tax Withholding
Last Updated: January 2026
Overview
North Carolina imposes a flat state income tax. The state has been steadily reducing its tax rate as part of ongoing tax reform, with the rate decreasing toward an eventual target of 2.49%. While the statutory rate is 3.99%, employers are instructed to withhold at 4.09% to ensure adequate withholding.
2026 Tax Rates
| Taxable Income | Statutory Rate | Withholding Rate |
|---|---|---|
| All taxable income | 3.99% | 4.09% |
Note: The withholding rate of 4.09% is slightly higher than the statutory rate to prevent underwithholding throughout the year.
Deductions and Exemptions
Standard Deduction:
- Single: $12,750
- Married Filing Jointly: $25,500
- Head of Household: $19,125
North Carolina does not have personal exemptions. The standard deduction is built into the withholding tables.
Special Considerations
State W-4 Form
North Carolina accepts the federal Form W-4 for withholding purposes. Employees may use North Carolina Form NC-4 to claim additional exemptions or request additional withholding for state purposes.
Rate Reduction Schedule
North Carolina has enacted a series of rate reductions:
- 2023: 4.75%
- 2024: 4.50%
- 2025: 4.25%
- 2026: 3.99% (current)
- Future: Decreasing toward 2.49% (contingent on revenue)
Withholding Tables
North Carolina Department of Revenue publishes annual withholding tables reflecting the current rates. Ensure you are using 2026 tables with the 4.09% withholding rate.
No Local Income Taxes
North Carolina does not permit local income taxes. Only state withholding is required.
Electronic Filing
Employers must file and pay electronically if:
- Prior year withholding exceeded $10,000, OR
- Filing 25 or more W-2s
Supplemental Wages
Supplemental wages (bonuses, commissions) may be taxed at the flat withholding rate of 4.09% or combined with regular wages.
Reciprocal Agreements
North Carolina has no reciprocal agreements with other states. All wages earned in North Carolina are subject to withholding regardless of the employee's state of residence.