What's New for Tax Year 2021? Adjustments to Federal Adjusted Gross Income ("AGI") Additions - The North Carolina General Assembly enacted legislation to decouple from ("not follow") some of the provisions of the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021. To the extent these provisions result in items of income that are not included in federal AGI but are taxable to North Carolina, you must complete Form D-400 Schedule S, Part A. Note: For tax year 2021, North Carolina conformed to the federal treatment of expense paid with forgiven PPP loans. As such, for tax year 2021, taxpayers are not required to add to federal AGI the amount of expenses paid with forgiven PPP loan proceeds to the extent the expenses were deducted in arriving at federal AGI. Deductions - The North Carolina General Assembly also enacted legislation that provided a deduction that exempts military retirement benefits from North Carolina tax for certain individuals. N.C. Itemized Deductions Charitable Contribution Limitation - North Carolina does not allow an individual to deduct qualified contributions of up to 100% of federal AGI. For N.C. income tax purposes, an individual may only deduct qualified contributions of up to 60% of federal AGI. Medical and Dental Expense Deduction - North Carolina now permanently allows an individual to deduct medical and dental expenses that exceed 7.5% of federal AGI. New "Reserved for Future Use" lines - were added to many of the supplemental forms for Form D-400. These lines will be used to accommodate future changes to the 2021 tax return, if necessary. Important: You must leave these lines blank, until the Department provides you with additional guidance. The unauthorized use of these lines may prevent the Department from processing your tax return. Failure to Pay Penalty North Carolina law was amended to provide a graduated rate when calculating the failure to pay a tax when due penalty. Related Content North Carolina Individual Income Tax Instructions
What's New for Tax Year 2021? Adjustments to Federal Adjusted Gross Income ("AGI") Additions - The North Carolina General Assembly enacted legislation to decouple from ("not follow") some of the provisions of the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021. To the extent these provisions result in items of income that are not included in federal AGI but are taxable to North Carolina, you must complete Form D-400 Schedule S, Part A. Note: For tax year 2021, North Carolina conformed to the federal treatment of expense paid with forgiven PPP loans. As such, for tax year 2021, taxpayers are not required to add to federal AGI the amount of expenses paid with forgiven PPP loan proceeds to the extent the expenses were deducted in arriving at federal AGI. Deductions - The North Carolina General Assembly also enacted legislation that provided a deduction that exempts military retirement benefits from North Carolina tax for certain individuals. N.C. Itemized Deductions Charitable Contribution Limitation - North Carolina does not allow an individual to deduct qualified contributions of up to 100% of federal AGI. For N.C. income tax purposes, an individual may only deduct qualified contributions of up to 60% of federal AGI. Medical and Dental Expense Deduction - North Carolina now permanently allows an individual to deduct medical and dental expenses that exceed 7.5% of federal AGI. New "Reserved for Future Use" lines - were added to many of the supplemental forms for Form D-400. These lines will be used to accommodate future changes to the 2021 tax return, if necessary. Important: You must leave these lines blank, until the Department provides you with additional guidance. The unauthorized use of these lines may prevent the Department from processing your tax return. Failure to Pay Penalty North Carolina law was amended to provide a graduated rate when calculating the failure to pay a tax when due penalty. Related Content North Carolina Individual Income Tax Instructions
