In North Carolina, property tax is a chief source of funding for county and city governments, schools and certain district-level services, including police and fire protection, and water and sanitation services. Tax is imposed on three types of property in the state: real property, motor vehicles and business personal property. The local property tax rate covering a residential or business address applies equally to each type of property associated with the address. County governments are responsible for tax assessment and collection associated with real property and business personal property, while the state division of motor vehicles handles property tax on motor vehicles.

Property Valuation in North Carolina

Under North Carolina law, residential and commercial real property in North Carolina must be reassessed for property tax purposes at least once every eight years. While most of the state's 100 counties follow an eight-year revaluation cycle, some counties have shifted to a four-year cycle. During a reassessment year, the county tax assessor appraises all real property in the county, valuing it according to fair market price on the first day of January. Assessed property values are not altered again until the next scheduled reassessment year, except under certain limited circumstances, such as a clerical error. Fluctuations in the real estate market are not grounds for special reassessment of a property.

Business personal property is reassessed every year according to its actual value on the first day of January. Business personal property includes office furniture, machinery, computers and other business equipment. The tax assessor appraises business personal property by determining the current replacement cost for an item and then applying a straight-line depreciation schedule to account for the item's age. Motor vehicles are reassessed every year according to retail market value for vehicles of the same year, make and model. Motor vehicle valuations are set according to the market on Jan. 1.

Average Property Tax in North Carolina

In the 2014-2015 tax year, North Carolina counties, cities and special taxing districts levied a combined total of $9.6 billion in property taxes. North Carolina property owners paid an overall average rate of roughly 94 cents per $100 of assessed property value, up slightly from an average rate of 92 cents per $100 in the prior tax year. Property owners living within city boundaries paid an average rate of about $1.10 per $100, while those living in unincorporated areas paid just 60 cents per $100.

Average rates varied widely at the county level. At the high end, Orange County had an average property tax rate of $1.38 per $100 of assessed value, followed by neighboring Durham County at $1.30 per $100. At the low end, Jackson County had an average rate of just 29 cents per $100, while Macon County came in at 36 cents.

North Carolina Compared to Nearby States

In order to compare states with vastly different comprehensive tax systems, it is useful to focus on residential property taxes. According to a 2015 study by the Tax Foundation that calculated effective tax rates on owner-occupied housing across the country, North Carolina homeowners paid an average tax rate of 0.85% on the 2015 market value of their homes. While this rate compares favorably on a national basis, it is a tick higher than rates in most Southeastern states. North Carolina has a lower tax burden than just one of its neighbors, Georgia, which is at 0.95%. South Carolina has a substantially lower rate at 0.57%, followed by Tennessee at 0.75% and Virginia at 0.78%. Alabama has the lowest average rate for homeowners in the region at 0.43%, while Florida is the highest at 1.06%.

North Carolina Compared to the National Average

On a nationwide basis, the average effective tax rate on owner-occupants is 1.19%, which is a full 40% higher than the average rate in North Carolina. Although it is slightly high for its region, North Carolina has the 19th lowest rate in the country. It comes in especially low compared to most states in the Northeast and Midwest, most of which average well above 1%.

Oklahoma Property Tax Guide

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