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.

On average, North Carolina residents face a tax burden of about 9.8%, making it the 20th most burdensome state, according to the Tax Foundation. The average annual income tax rate in the state is about 5.5% and an effective annual property tax rate of 0.85%.

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 a 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

According to the North Carolina Department of Revenue, counties, cities, and special taxing districts levied a combined total of $9.5 billion in general property taxes during the 2015-2016 tax year. Based on a home valued at $250,000, and under the average effective property tax rate of 0.85%, North Carolina residents paid $2,138 in property taxes for 2018. Average rates varied widely at the county level. Durham County residents paid the highest rate out of the state's 100 counties, with an average property tax rate of 1.22%. Meanwhile, Rowan and Union Counties both rounded out the list, with the lowest rate at 0.84%. 

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 the most recent 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 2018 market value of their homes. While this rate compares favorably on a national basis, it is higher than rates in most Southeastern states. North Carolina has a lower tax burden than just one of its neighbors, Georgia, which is at 0.91%. South Carolina has a substantially lower rate of 0.84%, followed by Tennessee at 0.73% and Virginia at 0.93%. 

North Carolina Compared to the National Average

On a nationwide basis, the average effective tax rate on owner-occupants is 1.21%, over 40% higher than the average rate in North Carolina. Although it is slightly high for its region, North Carolina has the 20th 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%.

The Bottom Line

Property taxes in North Carolina are charged at various levels, including personal property, motor vehicles, and business personal property. Compared to national levels, homeowners in the state pay significantly less in property taxes for owner-occupied homes. 

Oklahoma Property Tax Guide

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