North Carolina Standard Deduction or North Carolina Itemized Deductions
The starting point for determining North Carolina taxable income is federal adjusted gross income.
You may deduct from federal adjusted gross income either the N.C. standard deduction or N.C. itemized deductions. It is important to note that both have changed for tax years beginning on or after January 1, 2014. The N.C. standard deduction has increased for each filing status. However, there is no longer an additional standard deduction available for taxpayers age 65 or older, or blind. If you are (1) married filing a separate return for North Carolina income tax purposes and your spouse itemizes deductions, (2) a nonresident alien, or (3) filing a short-year return because of a change in your accounting period, you are not entitled to the standard deduction. Note: A short-year return does not relate to a taxpayer who files a return as a part-year resident. The N.C. itemized deductions are no longer identical to federal itemized deductions and are subject to certain limitations.
N.C. Standard Deduction
If your filing status is:
Your standard deduction is:
|Married Filing Jointly/Qualifying Widow(er)||
|Married Filing Separately|
|If spouse does not claim itemized deductions||
|If spouse claims itemized deductions||
|Head of Household||
To claim the N.C. standard deduction, you need to enter the standard deduction amount on Form D-400, line 11.
N.C. Itemized Deductions
No itemized deductions included on federal Form 1040 (Schedule A) are allowed as N.C. itemized deductions except qualified mortgage interest, real estate property taxes, and charitable contributions.
The sum of qualified mortgage interest and real estate property taxes claimed, respectively, under sections 163(h) and 164 of the Code may not exceed $20,000. For taxable year 2014, the amount allowed as a deduction for interest paid or accrued during the taxable year under section 163(h) of the Code with respect to any qualified residence shall not include the amount for mortgage insurance premiums treated as qualified residence interest. For spouses filing as married filing separately or married filing jointly, the total mortgage interest and real estate taxes claimed by both spouses combined may not exceed $20,000. For spouses filing as married filing separately with a joint obligation for mortgage interest and real estate taxes, the deduction for these items is allowable to the spouse who actually paid them. If the amount of the mortgage interest and real estate taxes paid by both spouses exceeds twenty thousand dollars ($20,000), these deductions must be prorated based on the percentage paid by each spouse. For joint obligations paid from joint accounts, the proration is based on the income reported by each spouse for that taxable year. Charitable contributions allowed as a deduction under section 170 of the Code are allowed without limitation. For taxable year 2014, a taxpayer who elected to take the income exclusion under section 408(d)(8) of the Code for a qualified charitable distribution from an individual retirement plan by a person who has attained the age of 70 1/2 may deduct the amount that would have been allowed as a charitable deduction under section 170 of the Code had the taxpayer not elected to take the income exclusion.
The itemized deductions are not subject to the overall limitation on itemized deductions under section 68 of the Code.
To claim N.C. itemized deductions, you need to complete Form D-400 Schedule S, Part C – N.C. Itemized Deductions. The total N.C. itemized deductions entered on Form D-400 Schedule S, line 19, also needs to be entered on Form D-400, line 11.
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