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Property Tax in North Carolina

posted on in Fiscal Insight

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As we prepare for the holiday season, many of us are also preparing our end-of-year finances; one issue could likely be a tax bill.  Property tax is imposed on all those who own property.  In North Carolina, property is divided into three separate categories according to the Department of Revenue:

The three main elements of the property tax system in North Carolina are real property, personal property, and motor vehicles. Real property consists of land and buildings. Personal property consists of, for this guide, tangible personal property or all personal property that is not intangible and is not permanently affixed to real property. Motor vehicles, if registered, are assessed according to its registration renewal date.

The Tax Foundation has done a nation-wide comparison of property taxes by county.  From the map below, you can see that North Carolina has lower tax levels than many states in the northeast, but higher levels than many of her neighboring states, ranking 30th most favorable nationwide.

North Carolina counties and municipalities collect property tax each year.  In doing some research on county and city government finances, I have found that property tax is the single largest revenue source for local governments.  North Carolina county governments collected over $6.1 billion in property taxes alone during fiscal year 2011-2012.  Interestingly enough, those counties with the largest property tax collections do not have the highest rates.  Many of the larger counties with dense populations such as Mecklenburg and Wake had the highest revenues, but the highest tax rates were in small eastern counties such as Scotland, Columbus, and Vance.  These counties have lower populations, and thus use higher rates to compensate for lower sales tax revenues.

See the chart below of North Carolina specific property tax information.

One of the major factors affecting property tax is revaluation.  Under North Carolina state law, all counties are required to conduct reappraisals of property at least every eight years.  Many counties had chosen to revaluate property more frequently than the eight-year requirement until the most recent recession.  Many counties revalued prior to the recession, when home values were at their highest, thus receiving more revenue from higher property tax valuations.  Since the recession, housing prices have fallen dramatically, so county governments have not wanted to revalue in anticipation of losing a large percentage of their property tax revenue.  There are currently 57 counties that have not revalued their property since 2009 and 37 that have not since 2008.  That means almost all the counties in North Carolina are charging property tax on inflated property values.

Hopefully property taxes don’t increase in the near future, and as time passes more counties will revalue their property so we can all expect lower property tax bills in the future.   Hopefully.

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Sarah Curry is Director of Fiscal Policy Studies at the John Locke Foundation. Previously, she worked for the North Carolina State Senate as a research assistant for the chairs of the Senate Agricultural Committee and headed the research efforts for… ...

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