Two new North Carolina laws that went into effect this week could impact your finances, with one providing modest savings and the other leading to potential increases in expenses.
The first law reduces the individual income tax rate by 0.25%, bringing it to 4.25%. An economist from NC State University, Mike Walden, estimated that someone earning $50,000 a year could save around $125 from this tax cut. This is part of a broader plan by the General Assembly to gradually reduce income tax rates. However, Walden cautioned that these savings could be short-lived, as the tax cut may be offset by other changes in the economy, including potential higher insurance costs.
Additionally, a new law for 2025 raises minimum auto insurance liability limits. For one person, coverage will increase to $50,000, and for multiple people, it will be raised to $100,000 per accident. Property damage coverage will also rise to $50,000. Walden warned that auto insurance premiums are likely to increase as a result, which could negate any savings from the income tax cut for most households.
For drivers, this law also updates how underinsured motorist coverage is calculated, ensuring that the full extent of damages in an accident is covered. While these changes aim to provide better protection for drivers, they could also lead to higher premiums, putting additional financial strain on some households.
In summary, while North Carolinians may enjoy short-term savings from the income tax reduction, rising insurance costs may offset these benefits, leaving many residents facing a tougher financial situation overall.