Real Estate Tax Savings in NC

Property owners with at least 20 acres of contiguous wooded land may qualify for this tax deferment program offered through the North Carolina Department of Revenue. For full details on this program, you can download the full guide. The program applies to both wooded land, and farm land. For the purpose of this article, we'll focus on the the program that applies to wooded land, which people commonly refer to as the "forestry program".

In a nutshell, if you own wooded land 20 acres or larger in North Carolina, you may qualify for the Present Use Value program. The easiest way to know if you qualify, and what you need to know to get started, visit your county tax assessor. He might explain to you that there are two general ways to qualify.

The first way is if you've owned the particular 20+ contiguous acres for 4 full years, then you can petition to sign up the property. The tax assessor will require that you file a "Forestry Plan", which will need to be developed by a licensed forester, whether private or one through the NC Forestry Service.

The forestry plan generally consist of a natural survey of the types and approximate age of trees growing on the property. The plan will also make some "best management practices" recommendations to promote timber production, including a prescribed harvest schedule for different areas of the property depending on age and species of trees.

The second way to qualify for the program is if you purchase a property of 20 acres or more that was already under the program with the previous landowner. In this case, you have up to 60 days from the day of closing to file NCDOR Form AV-5, in which you agree to take on the tax liability of the deferred taxes enjoyed by the previous landowner. In our experience, a landbuyer will present this form at closing, notifying the closing attorney and the seller that he/she will be keeping the property under the program, and intends to promptly file Form AV-5 with the county tax office.

When a property already under the Land Use Program is sold and purchased, keeping it under the program creates a "win - win" situation for buyer and seller. The seller at closing would normally have to pay the county tax office the deferred taxes for the last 3 full years, plus the running year at closing. However, when the landbuyer files Form AV-5, he/she is agreeing to take on the seller's tax liability. The result is that the seller doesn't have to pay deferred taxes at closing, and the landbuyer begins enjoying the low annual taxes collected by the county "right out of the gate".

A third instance where you can place timber land under the program is that if you already own property under the program, you can purchase additional adjoining timber land, even if it is less than 20 acres. In this case, the newly purchased property that wasn't under the program can automatically qualify and be brought under the tax-deferment program. 

As an example of the property tax-saving benefits of this program, I have selected a random wooded property in Wilkes County that, according to the county GIS, is 159.6 acres, and its regular tax-appraised value is $430,920. According to the Wilkes County tax website, this property has a deferred value of $393,410, and it is assessed annual property taxes based on a value of $37,510, or a 91.3% tax savings. This is based on 2016 taxes, and also the fact that it is located in the Ferguson Fire District. Wilkes County's 2016 tax rate is $0.67 per $100.00 value, and the Ferguson Fire District collects fire taxes at the rate of $0.10 per $100.00 value.

For tax reasons, it makes a lot of sense to place, or keep, timber lands in North Carolina under the Present Use Value program, but landowners and prospective landbuyers are advised to consult their county tax assessor and the NC Forestry Service to receive a full understanding of this program before making any decisions.