2003 TAX CONSIDERATIONS OF MOVING TO NORTH
CAROLINA
We are pleased that you have
decided to make North Carolina your place
of residence. To make your transition
easier, we have prepared this analysis which
highlights the pertinent tax laws. We hope this will
be of benefit in familiarizing yourself with
North Carolina income tax laws for individual
taxpayers.
NORTH CAROLINA TAXABLE INCOME
North Carolina taxable income
starts with taxable income as calculated for
federal income tax purposes and makes certain
adjustments. These adjustments
are summarized below:
Additions
The following items are additions
necessary to compute North Carolina taxable
income, to the extent they are excluded or
deducted from federal taxable income:
·
Interest income from obligations of other
states and their political subdivisions.
·
Lump-sum distributions from a pension or profit-sharing
plan.
·
Any state, local, or foreign income taxes
deducted on the federal return.
·
The amount by which the taxpayer's standard
deduction and personal exemption have been
increased for inflation for federal income
tax purposes.
·
The amount of federal estate tax attributable
to income in respect of a decedent that is
deducted from federal taxable income.
·
The amount by which the basis of property
for federal income tax purposes exceeds its
basis for state income tax purposes in the
year of disposition.
Deductions
The following amounts are
deductions necessary to compute North Carolina
taxable income to the extent they are included
in federal taxable income:
·
Interest received from obligations of the
United States or its possessions.
·
Interest received from obligations of the
state of North Carolina or its political subdivisions.
·
Up to $35,000 of any severance wages received
as a result of permanent involuntary termination
from employment.
·
Social Security benefits and Railroad Retirement
Act benefits.
·
Refunds of state, local and foreign income
taxes.
·
Up to $4,000 in state, local and federal government
retirement plan benefits, and up to $2,000
in private retirement plan benefits. (No more than
$4,000 in total retirement plan benefits can
be deducted per taxpayer.
Unless received by NC government retirees
with five or more years of service as of August
12, 1998.)
·
The amount of North Carolina inheritance tax
paid attributable to income in respect of
a decedent which is included in federal taxable
income.
·
The amount by which a taxpayer's mortgage
interest deduction was reduced for federal
income tax purposes because of the federal
mortgage interest tax credit.
Also, North Carolina began
using federal taxable income in determining
State income tax effective January 1, 1989. To provide for
the transition to the new tax law, several
additions and deductions are necessary. For the majority
of taxpayers, these transitional adjustments
will not be necessary.
Tax Credits
North Carolina allows a North
Carolina resident taxpayer to claim a credit
against North Carolina income taxes for the
following items:
·
Income taxes paid to another state or country
on income that is also taxed by North Carolina.
·
Child care and dependent care expenses.
·
Dependent children for whom you are allowed
to deduct a personal exemption on your federal
return (note that your federal adjusted gross
income must be less than $100,000 for married
taxpayers filing jointly or less than $60,000
for single taxpayers).
·
Premiums paid during the tax year on a qualified
long-term care insurance contract that offers
coverage to you, your spouse, or your dependent.
·
Payments made by parents for private or employer-sponsored
health insurance for their dependent children.
The credit is either $100 or $300 depending
on the amount of income.
·
Credit for charitable contributions of nonitemizers.
Various other income tax
credits are available to North Carolina residents,
including credits for the disabled, for certain
real property donations, and for installation
of qualified solar heating and cooling systems.
