North Carolina Standard Deduction or North Carolina Itemized Deductions

In calculating North Carolina taxable income, an individual may deduct from adjusted gross income either the North Carolina standard deduction or North Carolina itemized deductions, whichever is applicable.  If you were entitiled to and claimed the standard deduction on your federal return, you MUST take the standard deduction on your North Carolina return.  It is important to note that the North Carolina standard deduction is greater than the federal standard deduction for most taxpayers.

The standard deduction for most taxpayers for tax year 2017 can be found in the chart located below.  However, the standard deduction is zero for persons who are not eligible for the federal standard deduction under section 63 of the Code.  You are not eligible for the federal standard deduction if (1) you are married filng a separate return for federal income tax purposes and your spouse itemizes deductions, (2) you are a nonresident alien, or (3) you are filing a short year tax return because of a change in your accounting period.  In general, a nonresident alien is an alien (not a U.S. citizen) who has not passed the gren card test or the substantial presence test.  (For more information on the green card test and the substantial presence test, see federal publication 519, U.S. Tax Guide for Aliens).

N.C. Standard Deduction

If your filing status is: Your standard deduction is:
Single $8,750
Married Filing Jointly/Qualifying Widow(er)/Surviving Spouse $17,500
Married Filing Separately  
If spouse does not claim itemized deductions $8,750
If spouse claims itemized deductions $0
Head of Household $14,000

To claim the N.C. standard deduction, enter the standard deduction amount on Form D-400, line 11.  Important: Do not complete Form D-400 Schedule S, Part C - N.C. Standard Deduction or N.C. Itemized Deductions if you claim the N.C. Standard deduction shown in the chart above.

N.C. Itemized Deductions

If you itemized deductions on your federal return, you may claim either the North Carolina standard deduction or North Carolina itemized deductions.  North Carolina itemized deductions are not identical to federal itemized deductions and are not subject to certain limitations.  Specifically, no itemized deductions included on federal Form 1040, Schedule A are allowed as North Carolina itemized deductions except qualified home mortgage interest, real estate property taxes, charitable contributions, medical and dental expenses, and repayment of claim of right income. 

Important: Individuals must complete Part C of Form D-400 Schedule S, N.C. Standard Deduction or N.C. Itemized Deductions, and attach the schedule to Form D-400 if N.C. itemized deductions are claimed.  In addition, North Carolina itemized deductions are not subject to the overall limitation on itemized deductions under section 68 of the Code.

  • Qualified Mortgage Interest and Real Estate Property Taxes:  The sum of qualified home mortgage interest and real estate property taxes claimed under section 163(h) and 164 of the Code, respectively, may not exceed $20,000.  For spouses filing as married filing separately or married filing jointly, the total home mortgage interest and real estate taxes claimed by both spouses combined may not exceed $20,000.  For spouses filing as married filing separately with a joint obligation for home mortgage interest and real estate taxes, the deduction for these items is allowable to the spouse who actually paid them.  If the amount of the home mortgage interest and real estate taxes paid by both spouses exceed $20,000, these deductions must be prorated based on the percentage paid by each spouse.  For joint obligations paid from joint accounts, the proration is based on the income reported by each spouse for that taxable year.
  • Charitable Contributions: Charitable contributions allowed as a deduction under section 170 of the Code are allowed.
  • Medical and Dental Expenses: Medical and dental expenses allowed as a deduction under 213 of the Code, from Line 4 of Schedule A, Federal Form 1040, are allowed as a North Carolina itemized deduction.
  • Claim of Right Deduction: You may be entitled to a deduction for the repayment of claim of right income if you claimed the deduction as an itemized deduction on your federal return.  Complete the worksheet on Page 15 of Form D-401 to determine if you are entitled to a deduction.