Individual Income Tax Bulletins

These publications were prepared for the purpose of presenting the administrative interpretation and application of North Carolina income tax laws relating to individuals, partnerships, estates, and trusts. They do not cover all provisions of the law.

Taxpayers are cautioned that these publications are intended merely as a guide and that consideration must be given to all the facts and circumstances in applying these bulletins to particular situations. Taxpayers using these publications should be aware that additional changes may result from legislative action, court decisions, and rules adopted or amended under the Administrative Procedure Act, Chapter 150B of the General Statutes. In no case should these bulletins be relied upon for years other than the specific taxable years indicated.

* Revised October 2004 to include the following:

Page 26 Information on rollover distributions with respect to Bailey retirement benefits
Page 37 Adjustment for tax credits of S corporations passed through to shareholders
Page 51 Clarification on investment partnerships
Page 58 Employer paid child and dependent care expenses
Page 64 Legislative changes affecting the tax credit for qualified business investments
Page 69 Soldiers' and Sailors' Civil Relief Act rewritten and renamed the Servicemembers Civil Relief Act



** Important Changes to the
Individual Income Tax Bulletins for 2001 and 2002

Pages 11, 12, and 61: The 2001 General Assembly enacted legislation to eliminate the marriage penalty by increasing the standard deduction for married filers to twice the amount allowed single filers. The increase was to be phased in over a two-year period beginning in 2002. The legislation also increased the tax credit for children from $60 per child to $75 per child in 2002.

The 2002 General Assembly enacted Senate Bill 1115 which delays the increased standard deduction for 2002 to tax years beginning on or after January 1, 2003. The bill also delays the increase in the child credit to tax years beginning on or after January 1, 2003.

You should consider these changes when preparing 2002 individual income tax returns. When using the standard deduction charts on page 11 and the worksheet on page 12 of these Bulletins, you should use the standard deduction amounts for 2001. Under # 11. Credit for Children on page 61, the tax credit per child for 2002 is $60 instead of $75.

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