Do i have to do a state tax return

Gross income means all income you received in the form of money, goods, property, and services that isn’t exempt from tax, including any income from sources outside North Carolina. Do not include any social security benefits in gross income unless: (a) you are married filing a separate return and you lived with your spouse at any time in 2021, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b) applies, see the federal Form 1040 Instructions to figure the taxable part of social security benefits you must include in gross income. For more information on federal gross income, visit the IRS website at www.irs.gov and review the federal Form 1040 Instructions.

Note: The minimum gross income filing requirements under North Carolina law are different from the filing requirements under the Internal Revenue Code because North Carolina law does not allow the same standard deduction amount as the Internal Revenue Code.

Filing Requirements Chart for Tax Year 2021

• If spouse does not claim itemized deductions

• If spouse claims itemized deductions

Joint Returns

G.S. 105-153.8(e) requires a married couple to file a joint State income tax return if:

1.  They file a joint federal income tax return, and 
2.  Both spouses are residents of North Carolina or both spouses had North Carolina taxable income.

Generally, all other individuals may file separate returns.

On joint returns, both spouses are jointly and severally liable for the tax due.  A spouse will be allowed relief from a joint State income tax liability if the spouse qualifies for innocent spouse relief of the joint federal tax liability under Code section 6105.

A married couple who files a joint federal income tax return may file a joint State return even if one spouse is a nonresident and had no North Carolina income.  However, the spouse required to file a North Carolina return has the option of filing the State return as married filing separately.  Once a married couple files a joint return, they cannot choose to file separate returns for that year after the due date of the return.  If an individual chooses to file a separate North Carolina return, the individual must complete either a federal return as married filing separately, reporting only that individual's income and deductions, or a schedule showing the computation of that individual's separate income and deductions and attach it to the North Carolina return.  In addition, a copy of the complete joint federal return must be included unless the federal return reflects a North Carolina address.

Itemized nonbusiness deductions of a married couple may be claimed by a spouse only if that spouse was obligated to pay the items and actually paid the amount during the year.  In the case of a joint obligation (such as mortgage interest and real estate taxes), the deduction is allowable to the spouse who actually paid the item.

Unless you live in one of the few states that don't collect income taxes, you're on the hook for filing a state return. (The IRS will begin accepting federal returns on Jan. 24 this year.) State tax deadlines vary; you can check yours on the Federation of Tax Administrators website.

Some tax software will throw in state filing for free if you pay to prep a federal return, but others charge an extra fee. And, if you've recently moved -- or work in a different state than where you live -- you might need to file more than one state tax return, which may cost you even more to file, depending on which tax software you use.

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States with no income tax

In addition to your federal tax return, most states also require you to file a state return. There are seven states with no income tax, however. They are:

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming

Things are a bit more complicated in Tennessee and New Hampshire, which don't tax earned income. They do tax investment income (and dividends), however, so residents there may still be required to file a return. The rest of us -- whether single filers or joint filers -- have to pay some level of state income tax, whether it's a flat rate or based on your taxable income. 

States with no sales tax

Sales tax is a tax the government puts on the sale of goods and services. It's typically collected at the state, city and local municipality levels. Sales tax rates vary widely across the 45 states (and the District of Columbia) that collect state sales tax. In addition to the states that collect sales taxes, 38 states also allow for local sales taxes. In some instances, local taxes can be higher than state taxes.

The five states that don't collect sales tax are:

• Alaska
• Delaware
• Montana
• New Hampshire
• Oregon

The states with the highest combined sales tax between state and local sales taxes are:

• Tennessee: 9.47%
• Louisiana: 9.45%
• Arkansas: 9.43%
• Washington: 9.17%
• Alabama: 9.14%

While the state of Alaska doesn't collect sales tax, its local sales tax average is 1.43%. It's the state with the lowest overall sales tax. California has the highest state-enforced sales tax at 7.25%. 

Many states exempt groceries from sales tax, while some tax it at a lower rate compared with other goods. And, every year, many states offer a sales tax holiday. Some states like Alabama, Texas and Florida offer multiple tax holidays -- for hurricane supplies and school supplies. Mississippi has one just for firearms and hunting supplies. 

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How property taxes figure in

All 50 states and the District of Columbia collect some sort of property tax. It can be collected at the state, county and local level. Property taxes are one of the main sources of local revenue, and there are five states whose property taxes account for 30% or more of their overall revenue:

• Connecticut
• Maine
• New Jersey
• Rhode Island
• Vermont

Though Alabama's property taxes account for only about 10% of its revenue, it has one of the highest combined sales taxes -- between state and local -- in the country.

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