Tax Professionals Handbook

• A deduction of up to $2,500 ($5,000 on a joint return) is allowed to taxpayers for amounts contributed to the North Carolina Savings Program (NC 529) plan, regardless of the taxpayer’s income level.
• A tax credit is available to taxpayers who were allowed the federal adoption tax credit. The State credit is 50% of the allowable federal credit. Nonresidents and part-year residents are allowed the credit in proportion that their income is subject to NC tax as determined by their proration percentage.
• A deduction of $250 is allowed to unpaid voluntary firefighters and unpaid voluntary rescue squad workers who attended at least 36 hours of training and meetings during the year. A taxpayer may not claim a deduction as both an eligible firefighter and as an eligible rescue squad worker in a single tax year.
• A tax credit is available to certain taxpayers for premiums paid on long-term care insurance contracts. The credit is limited to $350 per long-term care insurance contract for those taxpayers who qualify for the credit. Nonresidents and part-year residents must limit the credit in proportion that their income is subject to NC tax as determined by their proration percentage. The taxpayer’s adjusted gross income must be less than the amount shown below for their filing status to qualify for the tax credit.

• In the case of property owned by a married couple filing a joint return, the maximum credit for real property donations is increased to $500,000. Previously, the maximum joint tax credit was $250,000.
• The top individual income tax rate decreased from 8.25% to 8% for tax year 2007 as previously enacted into law.
• The personal exemption adjustment increased from $800 to $900 per exemption for taxpayers whose adjusted gross income is less than $100,000 if married filing jointly/qualifying widow(er); $80,000 if head of household; $60,000 if single; and $50,000 if married filing separately. For taxpayers with an adjusted gross income exceeding the above limits, the personal exemption adjustment increased from $1300 to $1400 per exemption.

REMINDERS:

• A taxpayer does not have to submit any supporting documentation for an e-filed return for the following: Bailey settlement deduction, other deductions from federal taxable income, other additions to federal taxable income, 1099s, tax credit for taxes paid to another state or country, etc. The Department will contact the taxpayer if any supporting documentation is needed.
• Taxpayers are required to submit Form NC-478 and/or Forms NC-478A thru L if a business incentive or energy tax credit is claimed on an e-filed return. All Forms NC-478 and series A thru L should be mailed to the North Carolina Department of Revenue, PO Box 25000, Raleigh NC 27640-0500 within 48 hours after submitting the electronic individual income tax return. Individual income tax credits associated with Form NC-478 and series A thru L include but are not limited to:

• Credit for investing in machinery and equipment
• Credit for creating jobs
• Credit for research and development
• Credit for worker training
• Credit for investing in central office or aircraft facility property
• Credit for technology commercialization
• Credit for development zone projects
• Credit for nonhazardous dry-cleaning equipment
• Credit for investing in low-income housing
• Credit for use of North Carolina ports
• Credit for investing in renewable energy property


• Taxpayers are required to submit Form NC K-1 to the NCDOR for an e-filed return if the return shows tax payments from a partnership or S corporation. The form(s) should be mailed to the North Carolina Department of Revenue, PO Box 25000, Raleigh NC 27640-0001 within 48 hours after submitting the electronic individual income tax return.
• The North Carolina direct deposit should not be connected to RALs or Bonus Checks (G.S. 143.3.3 – Prohibits RAL on State Refund). The NC direct deposit is a true direct deposit, which requires a checking or savings account number and a routing transit number from the taxpayer that can show acceptable proof-of-account of their designated financial institution. RAL accounts are temporary accounts and in some instances, deposits cannot be made before these accounts are closed.