North Carolina's excise tax (revenue stamps) on real estate transfers is:
Audio Lesson
Duration: 2:29
Question & Answer
Review the question and all answer choices
$1 per $100
Option A is incorrect because North Carolina's state excise tax rate is $1 per $500, not $1 per $100. The $1 per $100 rate is much higher than what NC actually charges and doesn't account for local options.
$2 per $1,000
Option B is incorrect because while $2 per $1,000 is mathematically equivalent to $1 per $500, it fails to mention that counties may add additional local transfer taxes, making it an incomplete answer.
$1 per $500 (state) plus local options
No transfer tax
Option D is incorrect because North Carolina does impose a transfer tax on real estate transactions. There is no state in the US that completely lacks some form of real estate transfer tax, though the rates vary significantly.
Why is this correct?
Option C is correct because it accurately states North Carolina's excise tax rate as $1 per $500 of the sale price (equivalent to $2 per $1,000) and includes the important detail that counties have the option to add additional local transfer taxes, making it the most comprehensive and precise answer.
Deep Analysis
AI-powered in-depth explanation of this concept
Understanding North Carolina's excise tax on real estate transfers is crucial for real estate professionals because it directly impacts transaction costs and affects clients' financial decisions. This tax, also known as revenue stamps, is a state-imposed levy on real property sales that must be calculated and disclosed in closing documents. The question tests knowledge of specific state tax rates, which vary significantly across the US. To arrive at the correct answer, one must recognize that NC's base rate is $1 per $500 of sale price (equivalent to $2 per $1,000), but what makes option C correct is the addition of local options that some counties impose. Option B incorrectly states $2 per $1,000 without mentioning the local component. This question is challenging because it requires knowing both the state rate and understanding that local taxes may apply, making C the most complete answer. This connects to broader real estate knowledge about how location-specific regulations affect transactions.
Knowledge Background
Essential context and foundational knowledge
Real estate transfer taxes, also known as revenue stamps or excise taxes, are state or local levies imposed on the transfer of real property title. These taxes serve as significant revenue sources for state and local governments. North Carolina's excise tax has been in place for many years and is calculated based on the sale price of the property. The tax is typically paid at closing and is usually split between the buyer and seller as negotiated in the purchase agreement or dictated by local custom. The local option allows counties to impose additional taxes, which is why the rate can vary depending on the specific location within North Carolina.
Think of North Carolina's transfer tax like a base salary with bonuses. The state provides the base rate ($1 per $500), and counties can add their own 'bonuses' (local taxes).
Remember 'Base + Bonuses' when thinking about NC transfer taxes - base state rate plus possible county additions.
For NC transfer tax questions, always look for the 'per $500' rate and remember to consider local options. If an option includes both state and local components, it's likely correct.
Real World Application
How this concept applies in actual real estate practice
A listing agent in Wake County, NC is preparing a closing statement for a $300,000 home sale. They calculate the state excise tax at $1 per $500 ($300,000 ÷ 500 = $600). However, they must also check if Wake County imposes an additional local transfer tax. Upon verification, they discover Wake County adds $1 per $1,000, resulting in an additional $300. The total transfer tax of $900 must be properly allocated between buyer and seller in the closing disclosure, demonstrating how knowledge of both state and local rates is essential for accurate transaction processing.
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