North Carolina Standard Deduction or North Carolina Itemized Deductions
The starting point for determining North Carolina taxable income is federal adjusted gross income.
If you are entitled to and claim the standard deduction on your federal income tax return, you MUST claim the N.C. standard deduction on your State return. If you itemized your deductions on your federal return, you may claim either the N.C. itemized deductions OR the N.C. standard deduction on your State return unless you are not entitled to the N.C. standard deduction. The N.C. itemized deductions are not identical to federal itemized deductions and are subject to certain limitations. 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 1: A Nonresident alien who is a student or business apprentice and a resident of India is entitled to a standard deduction. Note 2: 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 not identical to federal itemized deductions and are subject to certain limitations. Note 3: A short-year return does not relate to a taxpayer who files a return as a part-year resident.
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, enter the standard deduction amount on Form D-400, line 11. Important: Do not complete Form D-400 Schedule S, Part C - N.C. Itemized Deductions, if you claim the N.C. standard deduction shown in the chart above.
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 (excluding mortgage insurance premiums), real estate property taxes, charitable contributions, medical and dental expenses, and repayment of claim of right income.
- 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 spouses filing as married filing separately or married filing jointly, the total mortgage interest and real estate property taxes claimed by both spouses combined may not exceed $20,000. For spouses filing as married filing separately with a joint obligation for home mortgage interest and real estate property taxes, the deduction for these items is allowable to the spouse who actually paid them. If the amount of home mortgage interest and real estate property taxes paid by both spouses exceeds twenty thousand dollars ($20,000), the 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.
- Medical and dental expenses allowed as a deduction under section 213 of the Code are deductible. (From Line 4 of Schedule A, Federal Form 1040.)
- New for tax year 2016: You may be entitled to a deduction for the repayment of claim of right income if you claimed this deduction as an itemized deduction on your federal return. Complete the worksheet on page 13 of Form D-401 to determine if you are entitled to a deduction.
The N.C. 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 20, also needs to be entered on Form D-400, line 11.
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