Understanding North Carolina’s Transfer Tax: A Quick Guide
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Joseph Gordon Associate EditorJoseph Gordon is an Associate Editor with HomeLight. He has seven years of experience reporting on the commercial real estate and insurance industries. He holds an MFA in Creative Writing from the University of San Francisco.
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If you’re planning to sell your home in North Carolina, you’ll want to have a strong understanding of North Carolina’s transfer tax. Transfer taxes are fees imposed by the state, county, or city when property ownership is transferred from one party to another.
This guide will explore the complexities of transfer taxes in North Carolina, detailing what sellers should anticipate in terms of cost, exemptions you may be eligible for, and provide you with some tools to assist you when selling your North Carolina home.
Connect with a Top Agent to Help Maximize Value
Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
Disclaimer: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of North Carolina area tax services or attorneys should not be considered endorsements.
What are transfer taxes?
Real estate transfer taxes are levied by state or local governments when the ownership of a property is officially transferred from one person to another. According to the Federal Trade Commission, this tax is applicable once the title of the property—the legal documentation that confirms ownership—is handed over to a new owner.
The amount of transfer tax owed can vary significantly depending on where the property is located, as different states, counties, and cities have their own specific regulations and rates.
These taxes serve a vital role in local and state economies; they generate revenue that funds public services and infrastructure projects, contributing to the overall financial health of the community.
Who pays for transfer taxes?
In North Carolina, the responsibility for paying transfer taxes generally falls on the seller of the property. However, they can negotiate the final terms and responsibility with the buyer as long as the terms are specified and included in the purchase agreement.
What are the types of transfer taxes?
Transfer taxes will typically vary based on local guidelines but can generally be broken down into three categories — state, city, and county, depending on the state. Here’s a quick look at how it works in North Carolina.
State transfer taxes
In North Carolina, an excise tax is levied when real estate changes hands at the rate of $1 for each $500 of the value of the property conveyed. This is also sometimes referred to as a revenue stamp.
County transfer taxes
There are seven counties in North Carolina that are authorized to levy an additional local transfer tax as well.
These seven counties are:
- Dare
- Camden
- Chowan
- Currituck
- Pasquotank
- Perquimans
- Washington
This tax is levied at a rate of $1 per $100 of the value of the property.
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Are transfer taxes deductible?
Unfortunately, transfer taxes are not deductible from your income tax. However, there is an option that might help reduce the taxes you owe on capital gains. Capital gains are the profits you earn from selling your property, much like the earnings from selling other assets, which are subject to federal taxation.
Sellers can consider transfer taxes as selling costs, which can then be deducted from the home’s final sale price. This approach is recognized by the IRS and can effectively lower the capital gains tax owed on the profit realized from the sale of the property.
Transfer tax exemptions
North Carolina home sellers may be exempt from some transfer taxes, depending on their circumstances.
Here are some examples where a transfer tax won’t apply to your transaction:
- Deeds of gift: Transfers of property as a gift, rather than through a sale, can be exempt from transfer taxes.
- Foreclosure deeds: Property transfers that occur due to foreclosure are typically exempt from these taxes.
- Deeds from local, state, or federal governments: Transfers involving government entities may also be exempt, simplifying transactions between government bodies and private individuals.
- Mergers: Property transferred as a result of mergers, consolidations, or conversion is exempt from the excise tax.
- Intestacy: Property that changes hands when the owner dies without a will is not subject to the transfer tax.
- Inheritance: Property inherited by decree of a will is exempt from the state’s excise tax.
Estimating transfer taxes for your home sale
When preparing to sell your home in North Carolina, estimating your potential expenses and earnings is essential. Utilize HomeLight’s Net Proceeds Calculator for a quick and accurate estimate of what you might make from the sale. This tool considers various costs, including transfer taxes, agent fees, and any updates you’ve made to the property, providing a comprehensive view of your financial outcome.
For a precise understanding of your transfer taxes and other closing costs, collaborating with a top real estate agent is highly recommended.
Not only can an experienced agent help clarify which costs might be negotiable—like transfer taxes—they can also guide you through the nuances of local real estate market conditions. Discussing these details early in the selling process with your agent can ensure you’re well-prepared for a successful transaction.
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