Several changes in North Carolina’s tax laws became effective January 1, 2023. The state’s individual income tax rate decreased from 4.99 to 4.75 percent. Future scheduled reductions under this same law will ultimately bring the rate to 3.99 percent in 2027 and continue the course to phase out the corporate income tax entirely by 2030. Additionally, simplification of the franchise tax (capital stock tax) will reduce franchise tax liability for many businesses. Specifically, franchise taxes will now be based solely on a business’ North Carolina-apportioned net worth.
Additionally, an inflation adjustment was made to North Carolina’s gas taxes, increasing the tax from 38.5 to 40.5 cents per gallon.
Finally, effective on January 1, 2023, taxpayers will be required to add back on their state income tax forms expenses deducted at the federal level for expenses paid for forgiven Paycheck Protection Program (PPP) loans. The add-back was first enacted in 2020 but suspended in 2021 until January 1, 2023. For additional information on these tax changes, click here.
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