State income tax laws pose complications for workers who earn income in one state but live in another. In North Carolina, the law requires you to file a tax return if you are making money from a job or property in North Carolina, no matter where you happen to live. However, the law exempts some income from taxes and allows you to calculate tax on the percentage of your income coming from North Carolina.
North Carolina does not exempt nonresidents from state income tax. You must file a state return in North Carolina if your gross income from North Carolina sources is $5,500 or more (for single taxpayers), or $11,000 (for those filing married, joint returns). These minimums rise to $6,250 if you are single and over 65; $11,600 for married taxpayers with one spouse over 65; and $12,200 for married taxpayers with both spouses over 65. There are different filing requirements for those falling in the "head of household" category and dependents.
Wage and Non-Wage Income
The income test applies to wages, salaries, tips, commissions and other compensation, as well as non-wage income. The latter can be derived from property you own in North Carolina, such as rental housing or farmland, or from a business that you operate within the state. State law on minimum filing requirements applies to all income combined, no matter where you earn it.
Computing Taxable Income
If you need to file a state income tax return in North Carolina, you have until April 15 of the following year to file a D-400, the North Carolina Individual Income Tax Return. You must attach a copy of your federal return with this form. Page 16 of the instructions allows you to figure the percentage of your non-exempt income derived from North Carolina sources. Page 4 of the D-400 calculates taxable income in North Carolina if you are a part-time resident or a nonresident.
Nonresident Tax Credits
North Carolina holds you to be a resident if you live within the state for 183 days or more during the tax year. If you are a resident and pay taxes to another state, you may claim that amount as a tax credit against your North Carolina tax liability. Likewise, if you are a resident of another state, you may claim North Carolina taxes paid as a credit against that other state's taxes. This avoids double taxation of your income.
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