Virginia vs. North Carolina Taxes: A Comparison of Key Differences

When it comes to taxes, every state has its own unique set of rules, rates, and regulations. If you’re considering moving to a different state or just want to understand the differences between Virginia and North Carolina’s tax systems, it’s important to know how these two states compare. Both Virginia and North Carolina are popular states to live in on the East Coast, but they have different tax policies that could significantly impact your personal finances.

In this blog post, we’ll compare the key aspects of Virginia vs. North Carolina taxes, including income taxes, sales taxes, property taxes, and more. Let’s break down what you need to know to make an informed decision.

1. Income Taxes: Virginia vs. North Carolina

One of the most important tax considerations for residents is income tax, as this can directly impact your paycheck and overall tax burden. Here’s how the two states compare:

Virginia Income Tax

Virginia has a progressive income tax system, which means the rate increases as your income rises. For tax year 2023, the rates for Virginia’s state income tax are as follows:

Up to $3,000 (individual) or $6,000 (married filing jointly): 2%
$3,001–$5,000 (individual) or $6,001–$10,000 (married filing jointly): 3%
$5,001–$17,000 (individual) or $10,001–$34,000 (married filing jointly): 5%
Above $17,000 (individual) or $34,000 (married filing jointly): 5.75%

Virginia’s top income tax rate of 5.75% applies to income over $17,000 for individuals or $34,000 for married couples.

North Carolina Income Tax

North Carolina also has a progressive income tax system but with a flatter structure. North Carolina has moved to a flat income tax rate, which means that the same rate applies to all income levels. For 2023, North Carolina’s flat income tax rate is 4.75%. This rate applies to both individual and joint filers, making it one of the more straightforward tax systems in the country.

2. Sales Tax: Virginia vs. North Carolina

Sales tax is another key tax that affects consumers. Here’s how Virginia and North Carolina stack up in terms of state sales taxes:

Virginia Sales Tax

Virginia imposes a state sales tax of 5.3% on most goods and services. In addition, localities can add their own local sales taxes, which can increase the total sales tax rate to 6%–7% in many areas, with Northern Virginia having the highest rate due to additional local taxes.

Food and Prescription Drugs: These are exempt from the state’s sales tax, though some localities may still impose taxes.
Certain Services: Services like personal property rentals and admission to events can also be subject to sales tax.

North Carolina Sales Tax

North Carolina has a state sales tax rate of 4.75%, which is slightly lower than Virginia’s base rate. However, local governments in North Carolina are allowed to impose additional sales taxes, which can bring the total sales tax rate up to 6.75%–7.5% in most areas.

Food and Prescription Drugs: Like Virginia, North Carolina exempts food for human consumption and most prescription drugs from sales tax.
Services: North Carolina does not generally tax services, but there are exceptions for certain activities like repairs, telecommunications, and admission fees.

Sales Tax Summary:

Virginia: State rate of 5.3%, with local rates that can push the total to 6-7%.
North Carolina: State rate of 4.75%, with local rates that can push the total to 6.75-7.5%.

3. Property Taxes: Virginia vs. North Carolina

Property taxes are another significant tax that can impact homeowners and renters. Here's how Virginia and North Carolina compare in this area:

Virginia Property Taxes

Virginia’s property taxes are levied by local governments (cities and counties), and the rates can vary widely depending on the locality. On average, the effective property tax rate in Virginia is about 0.80% of the property’s assessed value. However, some localities in Virginia, such as Northern Virginia, have higher rates.

Real Estate: Localities assess real estate at its fair market value, and the tax rate is determined by local governments.
Personal Property: This includes cars, trucks, and other personal property, and is typically taxed at a rate of $4.57 per $100 of assessed value.

North Carolina Property Taxes

North Carolina also levies property taxes at the local level, and the average effective property tax rate is slightly lower than Virginia's, at about 0.77% of the property's value.

Real Estate: Like Virginia, real estate is assessed by local governments, and the tax rate is determined by the county or municipality.
Personal Property: North Carolina taxes personal property like vehicles, with rates that vary by county. Typically, the rate is about $1.00–$1.50 per $100 of value.

Property Tax Summary:

Virginia: Average effective rate of 0.80%, varies by locality.
North Carolina: Average effective rate of 0.77%, varies by locality.

4. Other Taxes: Virginia vs. North Carolina

Both Virginia and North Carolina have a variety of other taxes that may impact residents, including estate taxes, inheritance taxes, and excise taxes. Here's a quick comparison:

Virginia Taxes

Estate Tax: Virginia does not have an estate or inheritance tax.
Vehicle Registration Fees: Virginia charges an annual vehicle registration fee, which varies depending on the type of vehicle.

North Carolina Taxes

Estate Tax: North Carolina does not have an estate or inheritance tax either.
Vehicle Registration Fees: North Carolina also charges an annual vehicle registration fee based on the type of vehicle.

Other Tax Summary:

Virginia: No estate or inheritance tax.
North Carolina: No estate or inheritance tax.