North Carolina Voters Cap the State Income Tax at 3.5%: What the November 3, 2026 Amendments Mean for 2027 Rates, Payroll, S Corps and Property Taxes

One-sentence takeaway

On November 3, 2026, North Carolina voters approved a constitutional amendment that lowers the maximum state income tax rate from 7% to 3.5% for taxable years beginning on or after January 1, 2027 (about 62% in favor, unofficial), plus a second amendment requiring the General Assembly to limit local property tax levy increases. Neither amendment cuts your tax by itself: your 2026 North Carolina rate stays 3.99%, and the drop to 3.49% for 2027 comes from a separate budget law, S.L. 2026-41. Individuals, S corporation and partnership owners, and employers should still update year-end planning and 2027 payroll now.

News background

The income tax amendment comes from Session Law 2026-4 (Senate Bill 1080), ratified May 21, 2026. It rewrites Article V, Section 2(6) of the North Carolina Constitution so that "the rate of tax on incomes shall not in any case exceed" three and one-half percent, instead of seven percent. The rule that personal exemptions and deductions must be allowed so that only net income is taxed stays in place. The ballot question read: "Constitutional amendment to keep the State income tax rate from being raised higher than three and one-half percent (3.5%)."

The property tax amendment comes from Session Law 2026-5 (House Bill 1089), also ratified May 21, 2026. It adds to Article V, Section 2(5): "The General Assembly shall enact general laws limiting the amount by which the levy of taxes on property may increase, which may include exceptions." It does not set a percentage or formula.

Unofficial results reported on election night showed about 62% approval for the income tax cap and about 60% for the property tax levy limit. Both amendments take effect once the State Board of Elections certifies the results; statewide certification is scheduled for November 24, 2026.

The previous cap of 7% was itself set by a 2018 constitutional amendment that lowered it from 10%. Separately, the July 7, 2026 budget law (S.L. 2026-41, Section 44.1) replaced most of the revenue-trigger schedule in G.S. 105-153.7 with fixed individual rates, and the Fiscal Research Division estimated that the 3.5% cap has no fiscal impact because scheduled rates are already below it.

Old vs. new

Constitutional ceiling on income tax rates: 7% (2018 amendment) → 3.5%, for taxable years beginning on or after January 1, 2027. The ceiling covers the state's income tax on both individuals and corporations.

Individual income tax rate (G.S. 105-153.7 as amended by S.L. 2026-41): 2026 3.99% (unchanged) → 2027, 2028 and 2029 3.49% → 2030, 2031 and 2032 3.24% → after 2032 2.99%. Later revenue triggers can lower it further in quarter-point steps, with 2.49% as the floor.

Corporate income tax rate (G.S. 105-130.3): 2025 2.25%; 2026 2%; scheduled 1% for 2028 and 0% after 2029. The amendment does not change these steps.

Taxed pass-through entities (PTET): a North Carolina taxed partnership (G.S. 105-154.1) or taxed S corporation (G.S. 105-131.1A) pays tax "at the rate levied in G.S. 105-153.7," so the entity-level rate follows the individual rate: 3.99% for 2026, 3.49% for 2027.

Payroll withholding: NCDOR's 2026 NC-30 tables use 3.99% plus 0.1%, a 4.09% withholding rate. Employers will need the 2027 tables once NCDOR publishes them.

Property tax: before, the constitution did not require a levy limit; now the General Assembly must pass general laws limiting how much a local government's total property tax levy can increase. Until that law is written, county and city property tax bills follow existing rules.

What does not change: sales tax, fees, and federal income tax are outside the income tax cap.

Self-check

If you are a W-2 employee living in North Carolina: your 2026 return (filed in 2027) still uses 3.99%. Starting with your first 2027 paycheck, withholding should reflect 3.49%; review Form NC-4 if you also have side income, a working spouse, or large itemized items.

If you own an S corporation or partnership doing business in North Carolina: decide whether the PTET election still makes sense for 2026 at 3.99% and model 2027 at 3.49%, together with federal SALT-cap rules and owner credits.

If you run a C corporation: the corporate rate is 2% for 2026 and is already scheduled to fall to 1% for 2028 and 0% after 2029; the amendment mainly removes the risk of a future rate above 3.5%.

If you are moving to or from North Carolina, or work remotely across states: part-year resident and nonresident returns (Form D-400 with Schedule PN) use the same rate, so the year of your move and the sourcing of wages still matter more than the cap.

If you own a home or rental property in North Carolina: your 2027 property tax is not reduced by the amendment. Watch for the levy-limit law in the next legislative session and keep track of county revaluation notices.

Simplified example

Simplified illustration only; it ignores credits, other income and federal interactions.

A married couple filing jointly reports $150,000 of North Carolina taxable income.

2026 (3.99%): $150,000 × 3.99% = $5,985.

2027 (3.49%, under S.L. 2026-41): $150,000 × 3.49% = $5,235, or $750 less.

What the cap adds: under the old 7% ceiling, a future legislature could have raised this couple's tax to as much as $10,500 without a vote of the people; under the new 3.5% ceiling, the highest possible rate would produce $5,250.

For an S corporation owner whose taxed S corporation reports $300,000 of North Carolina taxable income, the entity-level tax would be $11,970 for 2026 (3.99%) and $10,470 for 2027 (3.49%), a difference of $1,500.

Action steps and timeline

Now to November 24, 2026: results are unofficial until the State Board of Elections certifies them; no filing action is required, but start year-end projections using 3.99% for 2026 and 3.49% for 2027.

By December 31, 2026: review the timing of bonuses, invoices, retirement contributions and asset sales. Any timing change must reflect real economic events and be weighed against federal brackets; a 0.50-point state rate difference is rarely the deciding factor on its own.

January 2027: employers load NCDOR's 2027 withholding tables (NC-30) into payroll as soon as they are released; employees check the first 2027 pay stub.

January 15, 2027: fourth-quarter 2026 estimated payments are due for individuals who pay estimates.

April 15, 2027: 2026 Form D-400 is due at the 3.99% rate. PTET elections for 2026 are made with the entity's 2026 return, so decide before filing.

2027 legislative session: watch for the property tax levy-limit statute and any exceptions it creates.

How YCL can help

2026–2027 North Carolina tax projection: a side-by-side estimate at 3.99% and 3.49%, including federal impact, for individuals and families.

PTET review for S corporations and partnerships: whether the 2026 election still helps, the 2027 model at 3.49%, and coordination of owner credits on Form D-400.

Payroll setup: NC-4 reviews, 2027 withholding table updates, and multi-state payroll for remote employees.

Moving and multi-state filings: part-year and nonresident returns, residency documentation, and income sourcing for clients relocating to or from North Carolina.

Property owners: tracking the levy-limit legislation and county revaluation notices for homeowners and landlords.

YCL Accounting & Consulting is a multi-state CPA firm serving clients nationwide in English and Chinese, led by co-founder Gloria (Chenchen) Liu, CPA.

FAQ

Q: Does the 3.5% amendment lower my North Carolina income tax in 2027?

A: Not by itself. The 2027 individual rate of 3.49% comes from S.L. 2026-41, the 2026 budget law. The amendment sets a ceiling: for taxable years beginning on or after January 1, 2027, the legislature cannot set an income tax rate above 3.5% unless voters approve another amendment.

Q: When does the amendment take effect?

A: It becomes effective when the State Board of Elections certifies the results, scheduled for November 24, 2026, and applies to taxable years beginning on or after January 1, 2027. The 2026 rate of 3.99% is not affected.

Q: Does the cap apply to corporations and pass-through entities?

A: The cap applies to the state's tax on incomes, which covers individual and corporate income tax. North Carolina PTET for taxed partnerships and taxed S corporations is imposed at the individual rate in G.S. 105-153.7, so it is 3.49% for 2027.

Q: Will my property tax bill go down because of the property tax amendment?

A: Not automatically. The amendment requires the General Assembly to pass general laws limiting how much local property tax levies can increase, with possible exceptions. The specific limit has not been written yet.

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YCL Accounting & Consulting (YCL Tax, Accounting & Advisory)

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Disclaimer

This article is general tax information, not tax, legal, or investment advice for any individual, and it does not promise any tax result. Election figures are unofficial results reported on November 3–4, 2026 and may change at certification. Sources: S.L. 2026-4 (SB 1080), S.L. 2026-5 (HB 1089), S.L. 2026-41 Section 44.1, G.S. 105-130.3, G.S. 105-131.1A, G.S. 105-154.1, the Fiscal Research Division note on SB 1080, and NCDOR's 2026 NC-30 withholding instructions. Check the latest NCDOR guidance and consult a licensed professional before acting.