Can My Property Qualify For Deferred Taxes?

Present Use Valuation in NC

In North Carolina, property is taxed based on its market value. This valuation is determined by the tax assessor’s office in the county in which the property is located. However, in some cases, depending on how an owner uses their property, the property may be eligible for a Present-Use Valuation or Land Use Program which defers a portion of the taxes and lowers the owner’s property tax bill. 

The classification works like this: If the property qualifies for the present use valuation, the tax assessor’s office will charge the property taxes based on a lower valuation. The lower valuation will mean a lower tax bill every year that the property is eligible. Over time, this could save property owners a substantial amount of money. 

It is important to remember that the classification only defers taxes. If the use changes, the property no longer meets requirements, or all or a portion of the property is sold, then the tax office will “recapture” a portion of the deferred taxes. This means that the owner will receive a bill for the deferred amount of the current year’s tax bill, along with the deferred amount of the past three years’ tax bills plus interest. However, if the owner has owned the property for more than three years under the present use valuation, no other years’ deferred taxes are required to be paid back..  

There are generally three kinds of properties that may be eligible – Agricultural Land, Horticultural Land, and Forestland. Agricultural Land is that land used for the commercial production or growing of crops, plants, or animals. This includes crops such as grains, tobacco, cotton, and soybeans, and animals such as horses and cattle. Horticultural Land is that land used for the commercial production or growing of fruits, vegetables, nursery products or floral products. This includes apples, peaches, and strawberries. It also includes sod, shrubs, and Christmas trees. Forestland is that land used for the commercial growing of trees, which are harvested according to a management plan. 

In order to qualify for the present use valuation, the property must meet four tests. 

  • First, the property must be owned appropriately – either by individuals, certain trusts, or certain family-related business entities. 
  • Second, the property must have at least one tract that meets the minimum size requirement for the classification. This requirement may be as little as 5 acres, in the case of horticultural land, or as much as 20 acres for forestland. 
  • Third, the property must produce the minimum income requirements – $1,000.00 average gross income over the last three years. The exception to this is for forestland, which generally follows a harvesting schedule that may not produce income for many years, and Christmas Trees, which must meet requirements set by the NC Department of Revenue. 
  • Fourth, and finally, the property must comply with a management plan. The tax office may require a copy of the management plan, particularly for those properties qualifying as forestland. 

If a property owner wishes to receive the valuation and deferral of taxes, the property owner must complete an application with the tax assessor’s office in the county in which the property is located. The completed application must be turned in during the regular listing period, which is typically during the month of January of each year. If there has been a recent transfer or notice of change in value, then the application may be accepted later in the year, subject to 30-day and 60-day restrictions.

If you own property and you think you may be eligible for the present use valuation, be sure to contact the county tax office and your attorney for more information. 

Published by Emily Price on October 16. 2019.