In North Carolina, real estate transactions are subject to various taxes and fees, including the excise tax. As a North Carolina lawyer, it's crucial to understand the intricacies of this tax to guide your clients effectively. In this blog post, we will explore the basics of excise tax in NC Real Estate, including what it is, when it is paid, why it is paid, and to whom it is paid.
What is Excise Tax in NC Real Estate?
Excise tax, also known as the deed stamp tax, is a tax imposed on the transfer of real property ownership in North Carolina. It is governed by the North Carolina General Statutes, specifically
Chapter 105, Subchapter II, Article 16. The tax is calculated based on the consideration or value of the property being transferred.
When is Excise Tax in NC Real Estate Paid?
Excise tax is typically due at the time of recording the deed conveying the property. North Carolina law requires the tax to be paid before the register of deeds can accept the deed for recording. It is important to note that the deed must be recorded in the county where the property is located.
Why is Excise Tax Paid?
The primary purpose of excise tax is to generate revenue for the state and local governments. It is a form of taxation on the transfer of real property and serves as a source of funding for various public services and infrastructure projects. The tax is imposed to help finance government operations and support community development.
To Whom is Excise Tax in NC Real Estate Paid?
Excise tax is paid to the county in which the property is located. The tax is collected by the register of deeds at the time of recording the deed. The register of deeds is responsible for ensuring that the tax is paid before accepting the deed for recording. It is essential to note that each county may have its own specific requirements and rates for excise tax, so it is crucial to consult the local county government or a real estate attorney for accurate information.
Calculating Excise Tax:
The excise tax rate in North Carolina is $1 for every $500 of the consideration or value of the property being transferred. For example, if the consideration for a property transfer is $200,000, the excise tax would be calculated as follows:
Excise Tax = (Consideration / $500) * $1 Excise Tax = ($200,000 / $500) * $1 Excise Tax = 400 * $1 Excise Tax = $400
It's important to note that exemptions or reductions in excise tax may apply in certain circumstances, such as transfers between family members, transfers to government entities, or transfers involving nonprofit organizations. Consulting with a qualified real estate attorney can help determine if any exemptions or reductions are applicable to your specific situation.
Conclusion:
Understanding the concept of excise tax is essential for North Carolina lawyers involved in real estate transactions. Excise tax is a tax imposed on the transfer of real property ownership and is paid at the time of recording the deed. It generates revenue for the state and local governments and supports public services and infrastructure projects. It is paid to the county where the property is located, and the rate is based on the consideration or value of the property being transferred. By having a clear understanding of excise tax, lawyers can provide their clients with accurate guidance and ensure compliance with the applicable laws and regulations.
