Does North Carolina have a capital gains tax?
North Carolina capital gains tax is part of the state income tax: gains from selling real estate are added to your other income and taxed at the same flat 3.99% rate that applies to wages for tax year 2026. The North Carolina Department of Revenue (NCDOR) lists 4.25% for 2025 and 3.99% for years after 2025.
Because the rate is flat, the size of the gain does not change the rate. A $50,000 gain on a duplex and a $1.5 million gain on a 40-unit building in Charlotte are both taxed at 3.99%. On a large apartment sale, that makes the federal bill by far the bigger part of what you owe, and it is where most of the planning effort goes.
North Carolina income tax rate for 2026 and the scheduled cuts
North Carolina has no brackets. Every dollar of taxable income, including capital gains, is taxed at one rate, and that rate has dropped every year since 2022.
The 2026 Appropriations Act, S.L. 2026-41 (Senate Bill 257, signed July 7, 2026), set fixed future rates in Section 44.1, according to the General Assembly’s official bill summary. It replaces the old revenue-trigger cuts for 2027 through 2034 with set rates. Two more trigger-based cuts, to 2.74% and then 2.49%, could apply from 2035 to 2040 if General Fund revenue hits set targets. NCDOR’s rate page had not been updated for the new law when we checked, so confirm the rate for your closing year with NCDOR.
| Tax year | North Carolina rate | Source |
|---|---|---|
| 2024 | 4.5% | NCDOR rate schedules |
| 2025 | 4.25% | NCDOR rate schedules |
| 2026 | 3.99% | NCDOR rate schedules |
| 2027 to 2029 | 3.49% | S.L. 2026-41, Sec. 44.1 |
| 2030 to 2032 | 3.24% | S.L. 2026-41, Sec. 44.1 |
| 2033 and later | 2.99% | S.L. 2026-41, Sec. 44.1 |
How North Carolina tax stacks on federal tax
You owe North Carolina tax and federal tax on the same gain, and only the federal side splits the gain into pieces with different rates. For 2026, under IRS Revenue Procedure 2025-32, the 20% federal rate on long-term gains starts above $613,700 of taxable income for joint filers and $545,500 for single filers. The 0% rate covers income up to $98,900 joint and $49,450 single, and 15% applies in between.
Federal law taxes the depreciation you took as unrecaptured Section 1250 gain at up to 25%. The 3.8% net investment income tax applies once modified adjusted gross income passes $250,000 joint or $200,000 single. North Carolina has none of these layers, so the state rate is the same 3.99% on every part of the gain.
| Part of the gain | Federal rate (2026) | North Carolina rate (2026) |
|---|---|---|
| Depreciation taken (unrecaptured 1250 gain) | Up to 25% | 3.99% |
| Section 1245 recapture on personal property | Ordinary rates up to 37% | 3.99% |
| Appreciation above original cost | 0%, 15% or 20% | 3.99% |
| Short-term gain (held one year or less) | Ordinary rates up to 37% | 3.99% |
| Net investment income tax | 3.8% above the MAGI thresholds | None |
Short-term and long-term gains in North Carolina
North Carolina treats short-term and long-term gains the same way. A building you bought and resold within a year and one you owned for decades are both taxed at 3.99% for 2026, because the state uses one rate for all income.
The holding period still matters on your federal return. A sale after one year or less is taxed federally at ordinary rates up to 37%, while a sale after more than one year gets the 0%, 15% and 20% rates. If you are a few weeks short of the one-year mark, waiting can cut the federal bill a lot. It will not change the North Carolina bill, except where the wait pushes the closing into a year with a lower state rate.
North Carolina residents selling property in other states
A North Carolina resident is taxed on all income, wherever the property sits. If you live in Durham and sell a rental in Georgia, the gain goes on your North Carolina return at 3.99%, and Georgia taxes it too as the state where the property is located.
Under G.S. 105-153.9, North Carolina gives residents a credit for income tax paid to another state on the same income, so you are not taxed twice in full. The credit has limits, and your preparer will work it out on the return. Selling property in a state with no income tax, such as Tennessee or Florida, means North Carolina collects its full 3.99% with no credit to offset it.
Depreciation recapture and the bonus depreciation add-back
North Carolina has no separate recapture rate, so depreciation you took comes back as part of the gain at 3.99%. The state twist is bonus depreciation.
North Carolina does not follow federal bonus depreciation under IRC Section 168(k). NCDOR requires you to add 85% of the federal bonus deduction back to your state return, then lets you deduct 20% of that add-back in each of the next five years. S.L. 2026-31 (Senate Bill 595, signed July 2, 2026) moved the state’s Internal Revenue Code conformity date to July 5, 2025 and kept this add-back, even though the 2025 federal law (P.L. 119-21) made 100% bonus depreciation permanent.
Say a cost segregation study gave you $200,000 of federal bonus depreciation in 2025. You added $170,000 back to North Carolina income and deduct $34,000 a year from 2026 through 2030. If you sell before all five deductions are used, NCDOR’s Bonus Asset Basis guidance says your North Carolina adjusted gross income must be increased or decreased on the sale. Ask your preparer for the remaining add-back balance before the closing statement is final.
Do nonresidents pay North Carolina tax when they sell property?
Yes. A nonresident who sells North Carolina real estate owes North Carolina tax on that gain, but the state does not withhold anything at closing. No North Carolina statute requires buyers or closing attorneys to withhold on a sale by a nonresident individual. A withholding bill, S 614 in 2017, was filed and never enacted.
Instead, a nonresident reports the North Carolina-source gain on Form D-400 with Schedule PN, which allocates income between North Carolina and other states. If you live in Florida or Tennessee and sell a building in Asheville, you file a North Carolina return for that year even if it is your only North Carolina income. Your home state may give a credit for tax paid to North Carolina, so check both returns together.
Worked example: selling a $2 million apartment building in North Carolina
A married couple in Mecklenburg County sells a 20-unit building in Charlotte for $2,000,000. Commissions and other selling costs are $70,000, so the amount realized is $1,930,000. They paid $1,100,000 for it and have taken $380,000 of straight-line depreciation, leaving an adjusted basis of $720,000 and a gain of $1,210,000. Their other taxable income is $300,000.
Federal tax: the $380,000 of depreciation is unrecaptured Section 1250 gain at 25%, or $95,000. The other $830,000 sits above the $613,700 threshold once stacked on their income and the 1250 gain, so it is taxed at 20%, or $166,000. The 3.8% net investment income tax on the full gain adds $45,980. Federal tax on the sale is $306,980.
North Carolina tax: $1,210,000 times 3.99% is $48,279. Combined, the couple owes about $355,259, roughly 18.4% of the amount realized. The state share is under 14% of the total bill.
Timing matters a little. The same gain taxed at the 3.49% rate scheduled for 2027 would cost $42,229, which is $6,050 less, so a closing in early January 2027 instead of late December 2026 can be worth weighing. You can run your own figures in the capital gains tax calculator.
How a 1031 exchange changes North Carolina tax
A 1031 exchange defers North Carolina tax along with federal tax, because North Carolina starts from federal adjusted gross income and follows Section 1031. In the example above, a full exchange into a replacement worth $2,000,000 or more would push the whole $355,259 into the future.
North Carolina has no clawback. If you trade a Raleigh building for one in South Carolina, the state does not track the deferred gain and tax it when you sell the replacement, unless you are still a North Carolina resident at that time. Any cash or debt relief you keep is boot, taxed at 3.99% by the state and at the federal rates above. Our guide to the 1031 exchange in North Carolina covers the state details, and the 1031 exchange rules page covers the 45-day and 180-day deadlines.
Ways to lower the North Carolina tax on a sale
With a flat rate, bracket planning does little at the state level. What moves the number is the year you close, the deferral you choose and how carefully your preparer tracks basis.
- Close in a lower-rate year. The scheduled drop from 3.99% to 3.49% cuts the state tax on each $100,000 of gain by $500.
- Track the bonus depreciation add-back. Unused 20% deductions should be handled on the sale, not forgotten.
- Use an installment sale. Spreading payments over several years can move part of the gain into lower-rate years, though federal recapture is due in the year of sale.
- Exchange instead of selling. A 1031 into another building or a Delaware statutory trust defers both federal and North Carolina tax.
Selling a North Carolina apartment building to Skyline
Skyline buys apartment buildings with five or more units in North Carolina, from Charlotte and the Triangle to Greensboro, Wilmington and Asheville. We buy directly, close on your timeline, and can work inside 1031 deadlines. A firm closing date lets your CPA pick the tax year, plan around the rate cut and line up any exchange.
Selling? Spread the tax with seller-carry terms
If a large tax bill is what is keeping you from selling, an installment sale may help. When you carry part of the price as a note, the gain is generally reported as you receive payments instead of all in the year of sale. Some parts of the gain, such as certain depreciation recapture, can still be due up front, so run the numbers with your CPA first.
Skyline Capital Investments buys apartment buildings with five or more units and can offer seller-carry terms, or a delayed closing that fits your 1031 timeline. Send the address and unit count and we typically respond within 48 hours. How seller financing works · How an installment sale is taxed · Seller financing calculator.
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