THE NORTH CAROLINA FLYOVER – North Carolinians will see notable federal and state tax changes take effect this year.
The federal “One Big Beautiful Bill” introduces new deductions, including a deduction of up to $25,000 in tip income, exemptions for qualified overtime pay of up to $12,500 for single filers and $25,000 for joint filers, and an extra $6,000 senior deduction for single filers or $12,000 for joint filers.
The bill also introduces federal deductions of up to $10,000 in auto-loan interest for U.S.-assembled vehicles and up to $2,000 in charitable contributions for non-itemizers.
North Carolina’s flat individual income tax rate drops from 4.25% to 3.99% for 2026. Standard deductions increase from $12,750 to $13,000 for single filers and from $25,550 to $26,000 for joint filers. The corporate tax rate will fall from 2.25% to 2%. Residents may still owe state income tax on tips, overtime, auto interest, and senior deductions.