What is the North Carolina real estate transfer tax?
North Carolina calls it the excise tax on instruments, and most closing attorneys call it the revenue stamp or excise stamp. G.S. 105-228.30 imposes it on each instrument that conveys an interest in real property, at $1.00 on each $500 or fractional part of the consideration or value of the interest conveyed. That works out to 0.2%.
The “fractional part” wording matters on odd prices. A building that sells for $2,000,100 is taxed on 4,001 increments of $500, not 4,000.2, so the stamp is $4,001. Round the price up to the next $500 before you multiply.
The tax goes to the register of deeds in the county where the land sits, and it has to be paid before the deed can be recorded. If the property crosses a county line, it is paid in the county holding the greater part of the value. The county keeps half for its general fund and sends the other half, less a small collection allowance, to the Department of Revenue.
Who pays transfer tax in North Carolina?
The seller. G.S. 105-228.30 says the transferor pays the tax, and North Carolina contracts customarily leave it there. On a commercial or investment sale, the parties can agree to split it or move it to the buyer, but expect the default to be the starting point in any letter of intent.
In practice the closing attorney takes the stamp out of your proceeds at closing, shows it on the settlement statement and pays it to the register when the deed is presented. There is no separate state transfer tax return to file.
Counties with a local land transfer tax
Seven northeastern counties levy their own land transfer tax under local acts of the General Assembly: Camden, Chowan, Currituck, Dare, Pasquotank, Perquimans and Washington. Perquimans County describes its rate as $1.00 per $100 or fraction of $100, and Dare County’s tax office lists 1% of the consideration or value, with the local stamp issued alongside the state excise stamp.
These counties certify the tax on the deed before recording, and each runs its own exemption list, so confirm the figure with the county tax office before you set a net price. The rest of the state, including Mecklenburg, Wake, Guilford, Forsyth and Durham, charges only the state excise tax plus ordinary recording fees.
If your building is in Elizabeth City or another town in one of these counties, budget for both stamps. On a $2 million sale, 1% is $20,000 on top of the $4,000 state stamp.
Exemptions from the excise tax
G.S. 105-228.29 lists eight exempt transfers. They are transfers by operation of law, by lease for a term of years, under a will, by intestacy, by gift, where no consideration in property or money is due or paid by the buyer, by merger, conversion or consolidation, and by an instrument securing a debt.
For apartment owners, the most useful are the no-consideration and merger exemptions. Deeding your building into a single-member LLC without any payment generally falls under the no-consideration rule. Converting a partnership into an LLC, or merging one entity into another, falls under the merger, conversion or consolidation exemption.
Inherited property and gifts to family pass free of the excise tax. A foreclosure or a deed in lieu is not on the list, so expect the stamp to be computed on the consideration or value conveyed, which in a deed in lieu usually means the debt being satisfied.
A 1031 exchange isn’t on the list either. The exchange defers income tax, but your sale of the relinquished building is still a transfer for consideration, so you pay the stamp at closing as usual.
Does North Carolina tax entity or LLC interest sales?
No. North Carolina’s tax is an excise on instruments conveying real property, and Article 8E has no controlling-interest provision like New York’s or Pennsylvania’s. When a buyer acquires the membership interests in the LLC that owns your building, no deed is recorded and no excise stamp is due.
That doesn’t make an entity sale automatically better. Buyers inherit the LLC’s history, lenders often require a new borrower entity, and a property tax reappraisal doesn’t depend on whether the deed moves. At 0.2%, the stamp is rarely large enough to justify a more complex deal on its own, except in the seven counties with the extra 1%.
What price is the excise tax based on?
The statute taxes the consideration or value of the interest in real property conveyed. On an arm’s-length sale, that is normally the contract price for the land and building.
Apartment sales often include items that aren’t real property: appliances, laundry equipment, furniture in a furnished unit, a maintenance truck. Because the tax reaches only the interest in real property, a reasonable allocation of personal property in the purchase contract keeps those items out of the stamp. Keep the allocation defensible. It also affects the buyer’s depreciation and your own gain calculation, and both of you should report the same split.
Timing is simple. The closing attorney pays the stamp when the deed is presented for recording, usually the same day you close, and the register will not record a deed until it is paid. Portfolio sales that cover buildings in several counties need a separate stamp computed in each county.
Worked example: $2 million and $5 million apartment sales
Take a 30-unit building in Charlotte selling for $2,000,000. Divide by $500 and you get 4,000 increments, so the excise tax is $4,000. Mecklenburg County has no local land transfer tax, so that is the full transfer tax.
Move the same building to Dare County and the 1% local tax adds $20,000, for a total of $24,000. At $5,000,000, the numbers are $10,000 in state excise tax, plus $50,000 in a land transfer county, for $60,000.
These figures are the transfer tax only. Recording fees, the closing attorney’s fee, any brokerage and prorated property taxes are separate lines on the settlement statement.
| Sale price and location | State excise (0.2%) | Local 1% | Total |
|---|---|---|---|
| $2,000,000 in Charlotte | $4,000 | $0 | $4,000 |
| $2,000,000 in Dare County | $4,000 | $20,000 | $24,000 |
| $5,000,000 in Raleigh | $10,000 | $0 | $10,000 |
| $5,000,000 in a land transfer county | $10,000 | $50,000 | $60,000 |
North Carolina compared with neighboring states
North Carolina sits in the middle of the Southeast. Georgia’s rate is half of it, while South Carolina and Tennessee charge nearly twice as much. Virginia splits its taxes into a grantor tax that the seller pays and a larger recordation tax on the deed.
If you are weighing a 1031 exchange into a neighboring state, the replacement purchase can come with its own transfer cost, depending on who pays there. Tennessee puts its tax on the buyer, for example.
| State | Rate | Statutory payer |
|---|---|---|
| North Carolina | $1 per $500 (0.2%) | Seller |
| South Carolina | $1.85 per $500 (0.37%) | Seller |
| Tennessee | $0.37 per $100 (0.37%) | Buyer |
| Georgia | $0.10 per $100 (0.1%) | Seller |
| Virginia | Grantor tax 0.1% plus recordation tax 0.25% | Grantor tax: seller |
How the excise tax fits into your selling costs
At 0.2%, the excise stamp is one of the smaller costs of selling a North Carolina apartment building. It is a selling expense, so it reduces the amount you realize and your taxable gain.
The heavier items are income taxes. Federal long-term capital gains tax, the 3.8% net investment income tax for higher earners, and depreciation recapture at up to 25% on the portion of gain from depreciation you’ve claimed all apply, and North Carolina taxes the gain as ordinary income at its flat individual rate. A 1031 exchange can defer all of that, though not the stamp.
Seller financing works the same way. You can spread the income tax under the installment method, but the excise tax is based on the full consideration and is due when the deed is recorded.
Selling your North Carolina apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units across North Carolina, from Charlotte, Raleigh-Durham and the Triad to Wilmington, Asheville and the coast. We buy directly, can offer seller-carry terms and can close inside a 1031 exchange schedule.
Send the property address and unit count through the form on this page, or call (469) 660-2977. We typically respond within 48 hours, and our offer will lay out the closing costs, including who covers each stamp, so you can see your net before you sign.
