Individual income tax changes
• Changes the three current rates of 6 percent, 7 percent and 7.75 percent to one flat rate of 5.8 percent in 2014 and 5.75 percent thereafter.
• Eliminates personal exemptions of $2,500 or $2,000. Standard deductions currently ranging from $3,000 to $6,000 depending on filing status are increased to range from $7,500 to $15,000.
• Allows taxpayers to take either the standard deduction or an itemized deduction that combines mortgage interest and property taxes, as well as charitable contributions allowed for federal tax purposes. It is capped at $20,000.
• Eliminates $2,000 exemption on private retirement income and $4,000 exemption on certain government retirement income.
• Eliminates tax credit for childcare expenses is eliminated, along with those for education expenses, the totally and permanently disabled, property taxes paid on farm machinery, charitable contributions by non-itemizers.
• Child tax credit increases from $100 to $125 per child for family incomes at or below $40,000. The credit remains $100 for incomes from $40,000 to $100,000. No credit given for couples with income above $100,000.
• Deduction for severance pay is eliminated.
• Deduction for up to $50,000 in personal business income eliminated.
Earlier in the session, lawmakers eliminated the Earned Income Tax Credit, a tax refund geared primarily toward the working poor.
Corporate Income Taxes
• Reduces tax rate from 6.9 percent to 6 percent in 2014, and to 5 percent in 2015.
• Provides a trigger for possible rate reduction to 4 percent in 2016 and to 3 percent in 2017 if general fund tax revenues meet certain benchmarks.
• Extends tax credit for research and development two years, from 2014 to 2016.
• Extends economic incentives for passenger air carriers and motorsports two years.
• No change to state sales rate of 4.75 percent or local sales tax rates. Mecklenburgs total sales tax stands at 7.25 percent.
• Repeals the gross receipts franchise tax on live entertainment and movies; includes admission charges to movies, live events or an attraction in the state and local sales tax base.
• Elementary and secondary school events, nonprofit events, youth sporting events, agricultural fairs and state attractions are exempted from sales tax.
• Eliminates sales tax holidays for school items and Energy Star products.
• Estate tax is repealed.
• Caps the sales tax refund allowed to nonprofits at $45 million.
• Repeals electricity franchise tax and excise tax on piped natural gas.
• Social Security income wont be taxed differently.
• Lawn service, car repairs, alterations and other services remain exempt from the sales tax.
Source: N.C. Fiscal Research Division
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