North Carolina Payroll Guide

 

North Carolina Payroll Tax Guide (2026)

North Carolina’s flat income tax stepped down again on 1 January 2026, from 4.25% to 3.99%, and the withholding rate for bonuses moved with it to 4.09%, while unemployment tax runs from 0.06 to 5.76% on a 34,200 dollar wage base.[5]

10 min read • Reviewed by Rajanikant Patel CPA • Verified • Sources: NCDOR, NC DES, IRS
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Quick Facts

North Carolina payroll at a glance

North Carolina keeps payroll simple: a flat 3.99% income tax withheld from employees and unemployment insurance paid entirely by employers on the first $34,200 of each worker’s wages, with nothing else added.[5]

State income tax withholding
3.99% flat [2]
UI taxable wage base
$34,200 per employee [5]
New employer UI rate
1.000% [5]
Experienced UI rate range
0.06%–5.76% [5]
Employee-paid state payroll tax
None [5]
Social Security wage base
$184,500 [2]
FUTA net rate
0.6% = $42 per employee [13]
State minimum wage
$7.25 per hour (federal floor) [9]
Local minimum wage ordinances
None [9]
UI registration trigger
A general business employer is liable once it pays quarterly wages of at… [5]
Exempt salary threshold
$35,568 per year [11]
Additional Medicare threshold
Over $200,000, employee only [3]
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What changed for North Carolina payroll in 2026

Six items moved for North Carolina employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Flat rate drops to 3.99% Bonus withholding now 4.09% UI wage base rises to 34,200 Base contribution rate 1.9% New employers pay 1.000% No FUTA credit reduction
Using the income tax rate to withhold on a bonus: North Carolina’s flat income tax rate for 2026 is 3.99%, but Form NC-30 tells employers to withhold a flat 4.09% on supplemental wages paid separately from regular wages. The ten basis point gap is deliberate and it moves every time the individual rate changes. Payroll software that reuses the 3.99% figure for bonuses, commissions and severance will under withhold on every one of them.[2]
Estimate

2026 North Carolina payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

North Carolina · 2026 rates · per employee, per calendar year
Cash wages subject to payroll tax, before any withholding.
Your exact rate is on the Unemployment Tax Rate Notice, Form NCUI 104, usually issued in November or December for the following year.
FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $34,200–
FUTA, on first $7,000–
Social Security, 6.2%–
Medicare, 1.45%–
Employer payroll tax–

Withheld from the employee

Social Security, 6.2%–
Medicare, 1.45%–
Additional Medicare, 0.9% over $200,000–
Withheld from employee–
True cost of employment–
Employer tax as % of wages–
Total payroll tax, both sides–

State income tax withholding is not included above: it depends on the employee’s Form NC-4, Employee’s Withholding Allowance Certificate, with Form NC-4 EZ as a short version and Form NC-4 NRA for nonresident aliens and filing status, so it cannot be estimated from gross pay alone.

Rates & Nexus

Payroll tax rates & the nexus question

North Carolina runs two state payroll taxes. The table below is the whole state layer for 2026.[5]

The state payroll taxes

TaxPaid by2026 rateWage base
UIEmployer0.06%–5.76%; 1.000% new$34,200
Income tax withholdingEmployee3.99% flatNo limit

North Carolina does not switch between lettered schedules. The base contribution rate for 2026 is 1.9%, and an employer’s rate is that base reduced by its experience rating reserve percentage, which is the employer’s reserve ratio multiplied by 0.68, then floored at 0.06% and capped at 5.76%. The base rate itself moves between 1.9 and 2.9% depending on the Unemployment Insurance Trust Fund balance as a share of total insured wages.[5]

Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments are withheld at 4.09% when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.[2]

Who has to register

A general business employer is liable once it pays quarterly wages of at least $1,500 or employs at least one worker in 20 different weeks during a calendar year. Domestic service becomes liable at $1,000 or more of quarterly wages. Agricultural labour becomes liable at $20,000 or more of quarterly gross wages or 10 or more workers on any day in 20 different weeks. Liability also follows from acquiring a liable business, from voluntary election, or from federal unemployment tax coverage.[5] Income tax withholding is administered separately by North Carolina Department of Revenue, so most employers end up with two state account numbers, not one.

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

  • 1. Localisation of service→
  • 2. Base of operations→
  • 3. Place of direction & control→
  • 4. Employee’s residence

One remote employee is usually enough. A single person working from home in North Carolina generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.[5]

How to register

  • Cross the wage threshold→
  • NCSUITS, the North Carolina State Unemployment Insurance Tax System→
  • Receive account number→
  • Unemployment Tax Rate Notice, Form NCUI 104, usually issued in November or December for the following year→
  • File & deposit online

A general business employer is liable once it pays quarterly wages of at least $1,500 or employs at least one worker in 20 different weeks during a calendar year. Domestic service becomes liable at $1,000 or more of quarterly wages. Agricultural labour becomes liable at $20,000 or more of quarterly gross wages or 10 or more workers on any day in 20 different weeks. Liability also follows from acquiring a liable business, from voluntary election, or from federal unemployment tax coverage.[5]

Deposit schedule

Frequency follows the monthly tax figure. Less than $250 of North Carolina income tax a month is quarterly. At least $250 but less than $2,000 a month is monthly. $2,000 or more a month is semiweekly, which follows the federal semiweekly deposit calendar.[2]

Returns, reports & due dates

FormWhat it isDue
Form NCUI 101, Quarterly Tax and Wage ReportQuarterly unemployment returnApril 30, July 31, October 31, January 31
Form NC-5 for quarterly and monthly filers, Form NC-5P payment vouchers with Form…Income tax withholding returnsFrequency follows the monthly tax figure. Less than $250 of North
Annual reconciliationYear-end withholding reconciliationJanuary 31
Form 941Federal quarterly returnLast day of the month after quarter end
Form 940Federal unemployment, annualJanuary 31
New hire reportReport of newly hired employeesWithin 20 days of start date

Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.[5]

Pricing

Payroll Pricing

Simple, transparent pricing, no setup fees, no year-end surprises. One flat charge per pay run.

Your Biweekly Payroll Statement
Line items the big providers quietly bill for
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Setup fee
one-time onboarding
billed
extra
$0
Every payroll run
each pay cycle
billed
extra
$0
Off-cycle payroll
corrections & bonuses
billed
extra
$0
Year-end filings
W-2s, 1099s & more
billed
extra
$0
All you actually pay
Per employee, per pay run
$6 /emp
Plus a flat $40 minimum per pay run. That’s the whole bill.
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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.[5]

Subject wages

  • Salaries, hourly pay, overtime and piece rates
  • Commissions, bonuses and incentive pay
  • Most cash tips reported by the employee
  • Vacation, holiday and paid sick leave when taken as wages
  • Severance and payments in lieu of notice
  • The cash value of meals and lodging provided as compensation
  • Employer contributions to a non-qualified deferred compensation plan

Not subject

  • Reimbursements of genuine business expenses under an accountable plan
  • Employer contributions to a qualified retirement plan
  • Employer-paid premiums for accident and health insurance
  • Most third-party sick pay after the sixth calendar month
  • Payments to a genuine independent contractor
  • Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $34,200 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base
The slice of each employee’s annual pay that unemployment tax is calculated on. In North Carolina that is $34,200 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Experience rating
The method North Carolina Division of Employment Security uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate
The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Form NC-4, Employee’s Withholding Allowance Certificate, with Form NC-4 EZ as a short version and Form NC-4 NRA for nonresident aliens
The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with North Carolina Department of Revenue.
Reserve account
The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer
A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service
The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction
A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages
Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Federal, State & Local

North Carolina payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

TaxRate2026 base
Social Security6.2% each side$184,500
Medicare1.45% each sideNo limit
Additional Medicare0.9% employee onlyOver $200,000
FUTA, standard0.6% net$7,000
Federal income taxPer Form W-4No limit

North Carolina has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[13]

Layer 2: State

TaxRate2026 base
UI, new employer1.000%$34,200
UI, experienced0.06%–5.76%$34,200
Income tax, standard3.99% flatNo limit
Income tax, supplemental4.09%No limit

Layer 3, county & city: no payroll tax, but a wage floor

No county or city in North Carolina levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.[9]

The state minimum wage is $7.25 an hour, which is the federal floor, effective 2009-07-24. The tipped cash wage is $2.13. No local ordinance sets a higher floor. The North Carolina Wage and Hour Act sets the state rate at the federal figure and North Carolina cities and counties do not set their own minimum wages, so $7.25 an hour applies statewide. A tipped employee may be paid a cash wage of $2.13 only if tips make up the difference, and the tip credit is not permitted unless the employer obtains a signed certification of the amount of tips received from each employee.[9]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.[11]

FAQ

North Carolina payroll FAQs

North Carolina uses a flat individual income tax rate of 3.99% for tax year 2026, down from 4.25% for 2025. There is only one rate, so there are no brackets to track. Supplemental wages paid separately from regular wages are a special case and carry a flat 4.09% withholding rate instead.

The Department of Revenue keys it to how much North Carolina income tax you withhold in a month. Under $250 a month puts you on quarterly Form NC-5. At least $250 but under $2,000 a month puts you on monthly Form NC-5. At $2,000 or more a month you become a semiweekly filer, paying on Form NC-5P and reporting on the quarterly Form NC-5Q.

A newly liable employer is assigned 1.000% for 2026 on the first $34,200 of each worker’s wages. Once you have enough history you are experience rated instead: the 2026 base contribution rate of 1.9% is reduced by your experience rating reserve percentage, which is your reserve ratio multiplied by 0.68, and the result is bounded by 0.06% and 5.76%.

The Quarterly Tax and Wage Report is Form NCUI 101 and it is filed through NCSUITS. Reports are due 30 April, 31 July, 31 October and 31 January. Any employer or agent reporting wages for 10 or more employees must file electronically, and failing to do so carries a 25 dollar penalty.

The North Carolina Wage and Hour Act sets the state minimum at the federal figure of $7.25 an hour, and no North Carolina city or county sets a higher local rate, so one number applies statewide. The tipped cash wage is $2.13 with a maximum tip credit of $5.12, but the credit is only allowed if the employer obtains a signed certification of tips received from each employee.

No. North Carolina adds no surcharge, assessment or training fund charge on top of the unemployment rate, and there is no state disability, paid leave or employee side unemployment contribution. Beyond federal taxes, an employer’s North Carolina obligations are state income tax withholding at 3.99% and unemployment tax on the first $34,200 of each worker’s wages.

$34,200 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$7.25 an hour, which matches the federal floor. No local ordinance sets a higher rate. The tipped cash wage is $2.13.

April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

  1. North Carolina Department of Revenue – Tax Rate Schedules
  2. North Carolina Department of Revenue – NC-30, Income Tax Withholding Tables and Instructions for Employers, 2026
  3. North Carolina Department of Revenue – Withholding Tax
  4. North Carolina Department of Revenue – Withholding Tax Forms and Instructions
  5. North Carolina Division of Employment Security – Tax Rate Information
  6. North Carolina Division of Employment Security – Am I Required to Pay Taxes?
  7. North Carolina Division of Employment Security – File, Adjust or Review Quarterly Tax and Wage Report
  8. North Carolina Division of Employment Security – Employers
  9. U.S. Department of Labor, Wage and Hour Division – State Minimum Wage Laws
  10. U.S. Department of Labor, Wage and Hour Division – Minimum Wages for Tipped Employees
  11. U.S. Department of Labor, Wage and Hour Division – Fact Sheet 17A: Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees
  12. U.S. Department of Labor, Employment and Training Administration – Significant Provisions of State Unemployment Insurance Laws, January 2026
  13. Federal Register, U.S. Department of Labor – Notice of the Federal Unemployment Tax Act (FUTA) Credit Reductions Applicable for 2025
Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 2 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.
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