Last month, on June 30th, 2017, the North Carolina General Assembly passed the budget bill along with several other tax bills. Some of the most notable changes affected corporate and individual income tax rates, franchise tax calculations, standard deduction amounts, as well as other items discussed below. Various corporate tax credit changes were also passed.
Corporate income tax rates have dropped from 5% to 3% over the last several years. The General Assembly continued this trend by further reducing rates to 2.5%, effective in 2019. Other corporate changes include a flat $200 franchise tax to S Corporations on the first $1 million tax base, reverting to the normal rate of $1.50 per $1,000 for a tax base greater than $1 million.
Personal income tax rates have been lowered from 5.499% to 5.25%. Other changes include an increased standard deduction in every filing category: $17,500 to $20,000 (MFJ), $14,000 to $15,000 (HOH), and $8,750 to $10,000 (Single and MFS). In addition, the child care tax credit has been eliminated; instead, taxpayers will be allowed a deduction for child care expenses, starting at $2,500 and phasing out completely for joint filers with AGI over $120,000, effective 2018. Other filing categories have similar phase outs. Contact our office for more details regarding these, and other upcoming changes.
Article by: Deborah H. Sigmon, Manager CPA