Property Taxation in North Carolina

Instructor: Ian Lord

Ian is a real estate investor, MBA, former health professions educator, and Air Force veteran.

Let's take a look at how the state of North Carolina taxes real estate through setting local tax rates and assessing property values. We will also review some of the exemptions available to certain taxpayers that can reduce their tax bills.

North Carolina Real Estate Taxes

Tom is getting his finances in shape to buy a house in North Carolina after years of renting. One of the things he has realized is that instead of just writing a rent check each month he will also have to worry about property taxes. In this lesson we will help Tom learn about assessments and tax rates as well as some of the exemptions from real estate taxes that exist.

Assessment

In order to determine the amount of taxes owed on a specific piece of real estate, the property needs to be assessed by the local county assessor. An assessment is a determination of the property's value made by the tax assessor. Under North Carolina law properties must be assessed at least every eight years, although some counties do it more often. Tom could also appeal for a new assessment when certain things have been done to the property that significantly impact the value, such as remodeling or demolitions.

Tax Rates

Instead of having one across-the-board tax rate for all of North Carolina, each county and taxing authority sets its own rates. The tax rate is expressed as a dollar amount per $100 of assessed property value. For example, the county might have a $0.25 per $100 tax, the city another $0.60 per $100, and the school district $0.15 per $100, equaling a total local tax rate of $1.00 per $100 of assessed value. If Tom's house is appraised at $100,000, his tax bill would look like:

$100,000 / 100 = 1000

1000 X $1 = $1,000

Depending on where Tom chooses to buy in the state, his tax rate could run between $0.28 and $1.90 per $100 of assessed value. Sometimes buying a house just across a city or county line can make a dramatic difference in the final tax bill. Tom will have to pay this tax bill each year, but because of changes in the tax rate and assessment value the bill might rise or fall from year to year.

Exemptions

North Carolina offers tax exemptions for the elderly, disabled, and disabled veterans. When Tom reaches 65 years old or if he becomes totally permanently disabled he would qualify for a homestead exemption for the greater of $25,000 or 50 percent of his home's assessed value. Additionally, to qualify his income must be under $28,100 as of 2011. The exemption reduces the total tax bill; Tom's $100,000 house would only be taxed on $50,000 under this exemption. If Tom were totally and permanently disabled from the military he would be eligible for an exemption of $45,000, regardless of his age or income.

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