As the North Carolina General Assembly kicks off its 2025-long session, lawmakers have introduced a series of bills aimed at reducing the tax burden on residents.
New legislation aims to address taxes on tips and overtime wages, property taxes for seniors, and gambling losses. The proposals are part of Republicans’ broader effort to reform the state’s tax system.
Rep. Erin Paré, R-Wake, has signed on as a primary sponsor to all three bills, telling the Carolina Journal that “Republicans are pretty united on always wanting to look for ways to lessen the tax burden on North Carolinians.”
No Taxes on Tips & Overtime
House Bill 11 proposes eliminating taxes on tips, overtime, and bonus compensation through an income tax deduction. The effort aligns with President Donald Trump’s campaign promise to eliminate federal taxes on tips.
Rep. Harry Warren, R-Rowan, explained that tips should not be classified as compensation but rather as a gratuity free from government taxes.
“I think it’s the right thing to do,” said Warren. “Tax on tips doesn’t make any sense to me at all. I think it’s incongruous to classify tips as compensation – it’s a gratuity. You’ll see nothing you can count on if you’re a waiter or waitress, a person who’s relying on tips for your pay. I don’t think it actually qualifies as compensation.”
There are currently about 555,000 “service sector” jobs in North Carolina, though the number of individuals with service sector jobs is likely lower because many people work two jobs. Brian Balfour, senior vice president of research at the John Locke Foundation, expects the changes to benefit a decent number of working-class North Carolinians while possibly impacting how businesses operate.
“These changes also have the potential to alter people’s behavior,” Balfour said. “For example, certain service workers could lower the price they charge for their service and instead collect much more in “tips” in order to avoid the tax. HR departments could get creative in classifying overtime hours in order to avoid tax.”
Property Tax Exemption for Seniors
Expected to be filed in the House this week, a property tax exclusion bill will be under consideration to provide tax relief for elderly and disabled homeowners across the state.
Spearheaded by Paré, the proposal would offer a 50% exemption on property taxes for North Carolinians over the age of 65 who have lived in their homes for at least 15 years. The exemption would apply to households earning up to 70% of the Average Median Income (AMI), which in Wake County, for example, would be those earning $70,000 or less annually.
“The problem is in a lot of areas where they’ve seen property values skyrocket, seniors on a fixed income are getting pushed out of their homes,” Paré said in an interview. “These are people who bought their home like 50 years ago, who are like 85 and they just can’t afford to live in their home anymore.”
1. We need to elect reasonable fiscal conservatives to the Wake Board of Commissioners in 2026;
2. Pass my bill to help seniors stay in their homes despite the Wake County Commissioner’s out-of-control tax/spend mentality which is pushing them out.Let’s help our seniors. My… pic.twitter.com/c0ElBG5MJ1
— Erin Paré (@ErinforNC) February 3, 2025
“The property tax exemption has the potential to provide additional relief for low-income seniors, especially those who have been in their home for a long time and have seen their property values increase significantly to the point where their tax bill has become especially burdensome,” Balfour reacted to the proposal.
Gambling Loss Tax Deduction
House Bill 14 seeks to correct an inconsistency in North Carolina’s tax laws related to gambling losses. Under current state law, gamblers are required to pay taxes on their winnings without deducting losses, even if their net income is zero or negative.
“This bill is about ensuring a fair income tax environment in NC that is consistent with the NC constitution AND federal law,” Paré said. “The NC constitution says the state should tax NET income, not GROSS income.”
Paré explained that if someone bets $1,000 and wins $500, they shouldn’t be taxed on the $500 in so-called “winnings” because their net income is actually zero. Federal law allows gamblers to deduct the loss capped at what an individual actually won, but state law currently does not.
Paré acknowledged that while the bill enjoys strong support in the House, there may be some division over concerns that it could be seen as promoting gambling. However, she emphasized that the bill’s purpose is to prevent taxpayers from being unfairly taxed on income they never received.
Because it would only apply to individual filers choosing to itemize their deductions rather than take the standard deduction — which is $12,750 for a single filer and $25,500 for married filing jointly — the gambling deduction would only apply to a small subset of the population.
In previewing the General Assembly long session, Speaker of the House Destin Hall, R-Caldwell, and Senate President Phil Berger, R-Rockingham, both stressed the importance of further tax relief and a continued commitment to enhancing North Carolina’s economic competitiveness.
SEE ALSO: State leaders provide glimpse into forthcoming legislative agenda
Legislators will continue to introduce new bills in the coming weeks, which can be found here.