The North Carolina Senate had announced plans to reveal the new NC tax reform bill in early May. However, the press conference instead produced the outline of a measure that the Senate hopes to turn into a bill later in 2013. Citing pending reports of tax collections from April as part of the bill’s delay, the legislators provided the proposed tax changes that will combine to about $1 billion in tax cuts.
Parents are allowed to take a federal and state income tax deduction for each dependent child. However, North Carolina proposed Senate Bill 667 (Equalizer Voter Rights) in early April 2013 that will not allow parents to claim their child for state income tax purposes if their child has registered to vote at an address other than where the parent or legal guardian resides.
Making withdrawals from retirement accounts before actual retirement is usually a last resort. Individuals fear penalties and taxes—expenses they were not anticipating when they took the financially responsible step to contribute to their retirement. In addition to potential penalties, withdrawing funds early means they may not be accessible when intended: Retirement.
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Recently we wrote about North Carolina potentially joining several other states that are repealing state estate tax (or “death tax”). Last week, the North Carolina House Finance Committee approved repeal of the state’s death tax. If the repeal is enacted into law, soon there will no longer be any states in the Southeast that impose a death tax. (Tennessee’s death tax will expire in 2016.)
North Carolina has a new law, G.S. 105-134.6(b)(22), that grants business owners a deduction of up to $50,000 of their net business income from NC taxable income. The income must be reported on Form 1040 Schedules C, E or F, and no deduction for passive income is allowed. The North Carolina Department of Revenue just issued a Directive that answers FAQs on the new law.
Unfortunately folks like me who own small businesses that are incorporated cannot benefit from the deduction. However, those who own 100% of a business and want the protection that a separate legal entity provides can establish a limited liability company (LLC). A single member LLC is disregarded for tax purposes by the IRS, so the income is reported on the owner's Schedule C. At a tax rate of seven percent, the savings could equal $3,500 per year.
The North Carolina General Assembly recently passed legislation that preserves the deduction on NC 529 College Savings Plan contributions for all North Carolina taxpayers, regardless of income. The adjusted gross income limitations that were scheduled to return in 2012 on the state income tax deduction for the NC 529 Plan have been eliminated.
The maximum annual contribution deductible from NC taxable income remains the same at $2,500 (individual) or $5,000 (married, filing jointly). 529 Plans offer tax-free growth when used for qualified educational expenses, and are protected from creditors up to $25,000 for each plan.
From the North Carolina Department of Revenue:
Taxpayers across the nation will have until April 18, 2011, to file 2010 federal returns, extensions, and payments that ordinarily would be due April 15, 2011. The extra time is provided because April 15 falls on Emancipation day, a legal holiday in the District of Columbia.
For individual income tax purposes, North Carolina will follow the April 18 extended filing date and consider any returns and payments that would have been due on April 15 as filed on time if they are filed and paid by April 18. The extended deadline applies to the following State forms and payments:
The extended deadline does not apply to corporations that file franchise and corporate income tax returns due on April 15, 2011, or to first quarter 2011 corporate estimated income tax payments.
North Carolina Governor Beverly Perdue signed the Budget bill (SB 202) into law. The bill includes increased income and sales tax rates. See this post from Enrolled Agent Brian Strahle.
Democrats in the North Carolina House and Senate reached a compromise on tax increases yesterday. Briefly, the proposal would:
The income and sales tax increases are supposedly temporary, for a two year period. There are no additional sales taxes for certain services as contained in the earlier Senate proposal.
The only good thing I can say about this proposal is that at least the increased income taxes can be deducted for federal tax purposes (for those that itemize deductions). Additional sales taxes would not necessarily be deductible for those who deduct income taxes rather than sales taxes.
Yesterday North Carolina Governor Beverly Perdue revealed her proposed tax plan, which is designed to raise $1.6 billion in taxes. Here are some of the highlights:
Income Taxes
Sales Taxes
Tax Credits
Senate Bill 202, among other things, contains many tax increases for us in the Tar Heel state, to wit:
You may wish to contact the following Legislators to let them know how you feel about this proposed law:
Representative Paul Luebke (Chair of the House Finance Committee)
(919) 733-7663
Senator David Hoyle (Chair of the Senate Finance Committee)
(919) 733-5734
If you don't support the bill, there's a petition to sign. Make some noise, people!
Despite criticism from members of both parties, the North Carolina House of Representatives' Finance Committee approved a proposed tax package yesterday. The proposal includes the following:
These and other increases would bring in an estimated additional $784 million in revenue for the next fiscal year.
Depressing to contemplate, indeed, but at least a 9 cent per six pack increase in the beer tax was defeated! At 53 cents per gallon, North Carolina still has one of the highest beer taxes in the nation. And that doesn't count the sales tax!
The North Carolina Senate Finance Committee is reviewing a plan to cut income and sales taxes while instituting new sales taxes on certain services.
For income taxes, the top rate would drop from 7.75% to 7.5%, while the lowest rate would decrease from 6% to 5.25%. The calculation of income taxes would also be made easier, using the federal adjusted gross income without having to make further changes to determine the NC taxable income. Credits would be allowed for charitable contributions and home mortgages, and the child tax credit would increase $25 to $125.
Corporate income tax rates, currently 6.9%, would be reduced over a two year period to 4.5%, but limited liability companies would be required to pay franchise taxes. The could be bad news for for LLC owners, would are currently required to $200 annually to the state for the privilege of operating the company.
And, to the benefit of professionals and other business owners, state and local privilege licenses would be eliminated.
Finally, the state sales tax would be lowered from 6.75% to 6.00%. Many counties, however, have local rates than are higher. Sales taxes would be instituted on heretofore untaxed services/items such as building repairs, extended warranties, and downloaded music and software.
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