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Known for its classic Southern hospitality and easy-going lifestyle, North Carolina is an attractive spot for many property investors and homebuyers. The cost of living is low, with affordable properties and reasonable rent rates.
Before you get too distracted by the appeals of laid-back living where the mountains meet the beach, consider the implications of property tax in North Carolina.
If you are considering buying property in the Tar Heel State or you have recently invested and are trying to get ahead of your bills, it is vital to understand how North Carolina property taxes work, how much they cost, and how they are calculated.
You can save yourself a lot of hassle by getting to know the systems used and the schedules for payments, and it helps to have an overview of how your annual payments are worked out.
In this guide, we discuss all the essentials of property taxes in North Carolina to help property investors prepare themselves.
How Annual Property Tax Bills Work in North Carolina
The Property Tax Division of the North Carolina Department of Revenue administers three types of property taxes.
- Real property (including land, family homes, apartments or condos, commercial buildings, etc.)
- Personal property (movable belongings- can sometimes be included in annual property tax bills for your dwelling)
- Motor vehicles (paid separately to your real property tax bill)
There is no state-wide property tax rate- everything is decided and collected locally in each of North Carolina's counties.
When Are Property Taxes Paid in North Carolina?
In most North Carolina counties, property tax bills are due to be paid on September 1st- but you have a generous grace period until January 5th of the following year to clear the amount owed without incurring any additional charges.
You may receive a discount on your bill if you pay it early, as local governments have the authority to offer this, and many do.
Consequences of Paying Your North Carolina Property Tax Bill Late
From January 6th onward until the close of business on February 1st, the interest charges on your unpaid tax bill are 2% of the total debt. As of February 2nd, the interest rate changed to 0.75% per month until the bill is paid.
At this point, the local County Tax Office responsible for your property can create an in-rem foreclosure, making a case against you and your property for debts owed.
After two years, if you have still not paid, the county tax collector can launch a petition to sell your property in a tax sale to recover the money it is owed for your property tax, interest charges, and any other penalties that apply.
If your property is sold, the buyer receives the deed, and you lose ownership.
How Do You Pay Property Tax in North Carolina?
County assessors and designated tax collectors collect property taxes in North Carolina for their jurisdiction. Payments can be made in person at the relevant tax office and can sometimes be mailed or paid online, depending on the county you live in.
You can usually pay by cash, check, credit card, or debit card- but it is best to check with your local authority, as there are some variations.
How Much Are North Carolina Property Taxes?
You may be happy to hear that the average effective tax rate for properties in North Carolina is below the national average. In most counties, you can expect to pay significantly less than the median property tax bill issued in the USA.
It is important to understand that North Carolina does not have a state-wide tax rate, so your bills will vary depending on where you live. How much your property is worth will also play a significant role.
North Carolina property taxes are determined by the current market value of a property and the tax rate applied by the local board for that district.
North Carolina Property Assessments
To find out how much your property tax bill should be, the county needs to determine what your property is worth. Appraisals should be done at least once every four years to keep valuations current.
The North Carolina General Statute dictates the appraisal methods that should be used when assessing properties for tax purposes in North Carolina.
Taxable Value in North Carolina
Unlike many states, North Carolina bases property tax on the entire property amount, but the rates are adjusted accordingly.
North Carolina County Tax Rates
Local taxing authorities decide what the property tax rates will be that year in their county.
The average tax rate in North Carolina is 0.77%, but they vary between districts. Edgecombe has the highest rate at 1.28%, and Jackson has the lowest at 0.40%.
How Are Property Tax Bills Calculated in North Carolina?
The annual property tax paid by each owner is calculated using their assessed value and the local tax rate levied by their county. Exemption amounts are removed from the assessed value before the calculation is made.
Usually, tax rates are expressed as mills- meaning the dollars per 1000 of the home value appointed by the county assessor.
Here is an example of what a calculation may look like.
- Home value $200,000
- Mill rating $8.49
- $200,000 divided by 1000 = $200
- $200 x $8.49 = $1698
- Tax bill = $1698
If the property owners qualify for an exemption, the calculation would look like this.
- Home value $200,000 - exemption amount of $20,000 = taxable value of $180,000
- Mill rating $8.49
- $180,000 divided by 1000 = $180
- $180 x $8.49 = $1528.20
- Tax bill = $1528.20
Are There Any Ways to Lower Your North Carolina Property Taxes?
Tax rates for property owners do not change, but there are other property tax breaks provided. The main way people can reduce their property tax bill in North Carolina is through an exemption.
Only qualified homeowners can benefit from these programs, and applications must be submitted annually in most cases.
Another way to potentially reduce your tax bill is to appeal the assessed value of your property.
We have provided more details below.
Homestead Exemption
If you have lived in North Carolina for at least two years and use the property as your primary residence, you may be eligible for a partial exemption worth $35,000 from your property's taxable value.
It is used to protect people from losing their homes to creditors in case of bankruptcy. More information is available through your local Assessor's Office.
Senior Citizen Exemption
Homeowners who have lived in the same North Carolina property for at least five years and have limited income can apply for an exemption of up to $20,000.
The senior citizen property tax deferment program also applies to some over 65s.
Veterans Exemption
If a veteran has a disability that is 100% service related, they, or their unmarried surviving spouse if they pass away, may be eligible for a $45,000 exemption on their home value assessment for tax purposes.
Anyone receiving this benefit cannot apply for any other property tax exemptions in North Carolina.
Reducing Your Property Tax Through Assessed Value Appeals
Another possible way to reduce your property tax is to appeal the assessed valuation. If you believe your property has been unfairly assessed, you can appeal the decision through the Department of Tax Administration for your county.
The process is slightly different in each place, but you can get the forms and information you need from your tax office, and usually online.
Bear in mind that you will have to provide evidence to show the valuation is unfair. Otherwise, it is unlikely to be changed.
Conclusion
North Carolina taxes are relatively low, especially if you live in an area with low average property values and local tax rates.
As a property owner, it is your responsibility to stay up to date with your property tax obligations and to ensure that your property's assessed value is fair. Remember, you can appeal it if you believe you have been over-assessed.
Your property tax bills are likely to change year on year, so look out for early communications and pay attention to potential exemptions and discounts that might apply to you.
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