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Recent North Carolina Tax Legislation Decouples from IRC

The North Carolina General Assembly recently passed Session Law 2016-6 which stated that the North Carolina corporate and individual income tax laws generally follow the federal PATH Act of 2015.  However, the NC law “decouples” from the federal tax law in several instances.  This decoupling is consistent with treatment from prior years.  However, taxpayers should be aware of these differences and how it may affect their North Carolina tax returns.

Bonus depreciation addition required for 85% of bonus depreciation deducted on federal return.

Section 179 Investment deduction limited to $25,000 for NC purposes and investment limitation of $200,000 for NC.  Any amounts in excess of the deduction limit is added back at the 85% rate.

Mortgage insurance premiums are not deductible for North Carolina purposes.

Cancellation of qualified principal residence debt is not excluded from North Carolina income.

Qualified distributions to charity from an IRA are not excluded from NC income.  Instead they are added back to income and then treated as an allowable charitable contribution.

Qualified tuition and related expenses are not allowed as a deduction on the NC return.

For further information, please review the release from the North Carolina Department of Revenue:

If you have any questions about how these provisions may affect your tax situation, please contact our office.