On June 15, 2011, the North Carolina General Assembly overrode the Governor’s veto and passed a new $19.7 billion budget bill. Included in the bill are two key changes to the way individuals calculate their NC personal income tax beginning in 2012.
The new bill changed the starting point for calculating NC taxable income to the federal adjusted gross income (AGI) instead of taxable income (income after deductions and exemptions). NC taxpayers will no longer make adjustments to federal income for federal standard deductions and exemptions. Instead NC has adopted standard deductions and personal exemptions as follows:
NC Standard Deduction for 2012
Married, filing jointly $6,000 Head of Household $4,400
Single $3,000 Married, filing separately $3,000
The NC personal exemption for 2012 will be $2,500 for taxpayers with incomes up to the following limits:
$100,000 for taxpayers filing married, filing jointly
$ 80,000 for taxpayers filing as heads of household
$ 60,000 for single taxpayers
$ 50,000 for taxpayers filing married, filing separately
If income is above these thresholds, the personal exemption is reduced to $2,000. Effective January 1, 2012, North Carolina taxpayers with business income from partnerships, S-corps and proprietorships will be able to write off the first $50,000 of net business income. The term business income does not include passive income as defined under the Internal Revenue Code. Married taxpayers with two business incomes could receive up to a maximum $100,000 deduction. Since NC tax rates currently range from 6% to 7.75%, the deduction represents significant tax savings.
The provision was enacted with the hope that the tax break will generate job growth for North Carolina’s economy. Since this is a new tax deduction, further clarification will undoubtedly be forthcoming from the NC Department of Revenue. Because the provision is particularly advantageous for many of the small business owners in North Carolina, the tax savings should not be underestimated in tax planning.
It is important to note that these two changes for NC are not in effect until January 1, 2012. However, the potential tax savings present opportunities for year-end tax planning now. Call our office to see how we can assist you with a coordinated plan to make the most of the new North Carolina deductions.
About Blackman & Sloop CPAs, P.A.:
Blackman & Sloop is a full-service CPA firm headquartered in Chapel Hill, North Carolina and is actively involved in auditing, taxation, management consulting, financial planning, and related services. The firm directs a large part of its services toward providing management with advice on budgeting, forecasts, projections, financing decisions, financial analysis, and tax developments. The firm also performs review and compilation services and prepares not-for-profit, corporate, individual, estate, retirement plan, and trust tax returns as well as technology consulting services regarding installation and training on QuickBooks. Blackman & Sloop provides services in Raleigh, Durham, Chapel Hill, RTP, Hillsborough, Pittsboro, Charlotte, and the rest of North Carolina. To find out more please visit http://www.blackmansloop.com
Contact: CPA email@example.comToll Free: 1-877-854-7530
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1414 Raleigh Rd, Suite 300 Chapel Hill, NC 27517