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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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Is there a way to avoid paying property taxes in North Carolina

Resolved Question:

Is there a way to avoid paying property taxes in North Carolina if the home remains in the family (handed down from one generation to the next with a will stating that it will never be sold)?
Submitted: 9 months ago.
Category: Tax
Expert:  taxmanrog replied 9 months ago.

Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

 

Unfortunately, in North Carolina, there are only three ways to avoid paying property taxes.

 

First, North Carolina allows low-income homestead exclusions for qualifying individuals. Qualifying owners must apply with the Assessor's Office between January 1 and June 1. If you qualify, you can receive an exclusion of either $25,000, or 50% (whichever is greater) of the taxable value of your residence. The taxable value is determined as of January 1 of the year for which the exclusion is claimed.

 

Second, North Carolina's Disabled Veterans Homestead Exclusion program excludes from property taxes the first $45,000 of assessed value for specific real property or a manufactured home which is occupied as a permanent residence by a qualifying owner. A qualifying owner is one who:

 

  • Is an honorably discharged veteran who has a 100% total and permanent disability that is service-connected or be the unmarried surviving spouse of a qualifying veteran.
  • Is certified by the U. S. Department of Veterans Affairs of the permanent total disability that is service-connected.
  • Is a qualifying veteran with specially adapted housing per 38 U.S.C. 101.
  • There is no age or income requirement.

 

Finally, North Carolina has the Property Tax Deferral For The Elderly Or Totally And Permanently Disabled ("Circuit Breaker") program. This program is available instead of Homestead Exclusion for elderly or disabled homeowners whose income does not exceed 150% of the income eligibility limit (for 2013 it is $28,100 for income received from all sources during the calendar year 2012) for the Homestead Exclusion.

 

As of January 1 of the year for which the deferral is claimed, the applicant must:

 

  • Meet the requirements as stated in the Homestead Exclusion for age or disability.
  • Must have owned and occupied the property as the owner's permanent legal residence for five (5) years.
  • Must be a North Carolina resident.
  • For married applicants residing with their spouses, include the income from both spouses, whether or not the property is in both names.

 

This last program is only a deferral of the tax bill. Unlike the exclusion, which reduces taxes owed (by excluding part of the value on which the tax is based), deferral postpones (defers) paying a portion of taxes due in one year to some future time, such as: sale of the property, the property no longer being the applicant's primary residence, or the death of the applicant with no surviving spouse.

 

So in short, unless you meet the qualifications for one of these three programs, you will have to pay property tax on your North Carolina home.

 

I hope this answers your question! If you have any questions, please feel free to ask. If my answer has been helpful, please rate me highly! I would appreciate that!

 

Thanks again! Have a great weekend (almost)!

 

Roger

Customer: replied 9 months ago.

Can I place the property into a conservancy so it can never be sold or developed meaning me and my descendants can use the property but can never sell it? In return, would the taxes be waived?

Customer: replied 9 months ago.
Relist: Incomplete answer.
Expert:  taxmanrog replied 9 months ago.

Welcome back! I am sorry I didn't answer your question right away, I was away from the computer.

What you are referring to is called a Conservation Easement. Private property subject to a conservation easement remains in private ownership. Many types of private land use, such as farming, ranching and timber harvesting, can continue under the terms of a conservation easement, and owners can continue to live on the property. The agreement may require the landowner to take certain actions to protect land and water resources, such as fencing a stream to keep livestock out or harvesting trees in certain way; or to refrain from certain actions, such as developing or subdividing the land. Conservation easements do not mean properties are automatically opened up to public access unless so specified in an easement.

There are both income tax and property tax benefits associated with conservation easements. Usually conservation easements are donated, although some are sold to a private organization or public agency. An easement might be bought from a landowner strapped for cash, such as one who is trying to keep the family ranch together but who is faced with rising property taxes. Either way, there can be significant tax savings for the landowner. In either situation, the conservation organization or public agency retains the right to enforce the easement promises.

When a landowner conveys a gift of a conservation easement to a non-profit or public agency qualified to hold such interests, the transfer may entitle the landowner to a number of tax benefits. The landowner may qualify for a federal charitable income tax deduction under IRC section 170(h) if he or she donates or "bargain sells" the conservation easement, which requires that the easement 1) comply with state law requirements for easements in land; 2) be conveyed to a qualifying organization to hold the easement; and 3) be conveyed "exclusively for conservation purposes" and in perpetuity.

Assuming that those requirements are met, the amount of the charitable contribution for a gift of bargain sale by the landowner is based on the appraised fair market value of the easement. This is determined by calculating the difference between the value of the property today without (or "before") the imposition of the easement and the value of the property today subject to (or "after") the imposition of the easement. This latter value is determined by the nature of the restrictions and their impact on present and future land use. The resulting amount is the value of the easement for tax purposes. Generally, a property's value is based on its "highest and best use," which often means development.

In addition to the income and estate tax benefits I have outlined above, many states, including North Carolina, allow some local real property tax benefits for landowners who convey conservation easements on their lands. Because property is generally assessed at its fair market value based on its highest economic use and because the easement removes some of the most valuable development rights so that the property's highest and best use is severely limited, local assessors may reduce the assessed value of the property for property tax purposes, thereby lowering the property tax bill on lands encumbered by easements.

Here is a good summary of North Carolina’s conservation easement program. It specifically states that the easement DOES NOT remove the land from the property tax rolls, it just reduces the assessed value for property tax purposes.

http://www.ncadfp.org/documents/ConservationEasementHandout.pdf

I hope this answers your questions! If you have any more, please feel free to ask away! If you have found my answer helpful, please rate me highly. I would appreciate that!

Thanks! Have a great Friday!

Roger

taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 373
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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