North Carolina taxes real estate gains at a flat 3.99% for 2026, and unlike most of its neighbors it does not withhold state tax when a nonresident individual sells; the buyer only files an information report, Form NC-1099NRS. North Carolina capital gains tax on real estate has no long-term discount, so the full gain is taxed, and a 1031 exchange North Carolina investors complete defers the state tax along with the federal bill. The excise tax on the deed, and the extra 1% land transfer tax in some Outer Banks counties, still come due.
Reviewed by Jon Hilley, CEO & Founder of 1031 Specialists. Last reviewed September 29, 2026.
| State tax on real estate gains | Flat 3.99% for tax years after 2025 (4.25% in 2025) |
|---|---|
| Long-term capital gains treatment | Taxed as ordinary income at the flat rate; no exclusion |
| Nonresident withholding at closing | None for individual sellers; buyer reports the sale instead |
| Withholding form | Form NC-1099NRS, filed by the buyer within 15 days of closing (information report) |
| Transfer or conveyance tax (a 1031 does not defer it) | State excise tax $1 per $500, paid by the seller; plus 1% local land transfer tax in some counties, such as Dare |
| Clawback on out-of-state replacement property | None |
| Conforms to Section 1031 | Yes |
Table of contents
- How much is capital gains tax on real estate in North Carolina?
- North Carolina tax on a $300,000 gain: worked example
- North Carolina nonresident sellers: a report, not withholding
- North Carolina excise tax and local land transfer taxes
- North Carolina conformity and clawback
- Vacation rentals on the coast and in the mountains
- Moving into or out of North Carolina
- Where North Carolina 1031 exchanges happen
- Federal 1031 rules in brief
- Common North Carolina 1031 exchange mistakes
- Start your North Carolina exchange with 1031 Specialists
- Frequently asked questions
- Sources
How much is capital gains tax on real estate in North Carolina?
The North Carolina Department of Revenue lists the individual income tax rate as 3.99% for taxable years after 2025, down from 4.25% in 2025. The same rate applies to wages, interest and gain on property, and there is no separate rate or deduction for long-term capital gains. Depreciation recapture is taxed at 3.99% like the rest. There are no local income taxes.
The rate is set to keep falling. The 2026 Appropriations Act (S.B. 257, Session Law 2026-41, ratified July 7, 2026) replaced the old revenue triggers with scheduled cuts beginning in 2027. If you are deciding between selling in December or January, check the enacted schedule with your CPA.
The federal side is much larger:
- Long-term capital gains at 0%, 15% or 20%; the 20% bracket starts above $545,500 single and $613,700 joint in 2026.
- Up to 25% on unrecaptured Section 1250 gain.
- 3.8% net investment income tax above $200,000 single or $250,000 joint MAGI.
North Carolina tax on a $300,000 gain: worked example
Assumptions: a $300,000 long-term gain on a North Carolina rental, $100,000 of it unrecaptured §1250 depreciation, joint filers already in the top federal bracket. North Carolina applies 3.99% to all $300,000.
| Unrecaptured §1250 gain: 25% on $100,000 | $25,000 |
|---|---|
| Long-term capital gain: 20% on $200,000 | $40,000 |
| Net investment income tax: 3.8% on $300,000 | $11,400 |
| Federal subtotal | $76,400 |
| North Carolina tax: 3.99% x $300,000 | $11,970 |
| Total deferred by a full 1031 exchange | $88,370 |
A full exchange keeps $88,370 in your next property. Run your own recapture figure in the depreciation recapture calculator, and if you plan to take some cash out, the partial 1031 boot calculator shows what becomes taxable.
North Carolina nonresident sellers: a report, not withholding
North Carolina takes a different approach from Georgia and South Carolina. When a buyer purchases North Carolina real property from a nonresident individual, partnership, estate or trust, the buyer must file Form NC-1099NRS, Report of Sale of Real Property by Nonresidents, with the Department of Revenue within 15 days of closing and give the seller a copy. The form reports the gross sales price. No state tax is taken out of the seller's proceeds.
That does not make the sale tax-free. A nonresident who sells North Carolina property outright must file a North Carolina nonresident return and pay 3.99% on the gain, and the NC-1099NRS tells the Department to expect it. In an exchange, the report is still filed, and your return shows the deferral through federal Form 8824. Keep the exchange documents handy in case the Department asks why no gain was reported.
Foreign sellers face separate federal withholding under FIRPTA; see our guide to FIRPTA for foreign sellers.
North Carolina excise tax and local land transfer taxes
Under Article 8E of the revenue laws, North Carolina charges an excise tax of $1 on each $500 of consideration, paid by the transferor to the register of deeds before the deed is recorded. That is $2 per $1,000, so a $750,000 sale carries $1,500. Half goes to the county and half to the state. A 1031 does not defer it.
A few counties add their own land transfer tax under local legislation. Dare County, home to most of the Outer Banks, charges a land transfer tax of 1% of the consideration on top of the state excise stamp, so a $750,000 Nags Head rental costs $7,500 plus $1,500. Check with the register of deeds in any coastal county before you set your net proceeds.
North Carolina has no mortgage recording tax and no mansion tax.
North Carolina conformity and clawback
North Carolina starts from federal adjusted gross income and follows Section 1031, so gain you defer federally is deferred for the state. North Carolina has no clawback or annual tracking form. If you exchange a Raleigh rental into a Florida building and then sell the Florida property after becoming a Florida resident, North Carolina does not come back for the deferred gain.
That is a meaningful difference from California or Oregon, which track gain that leaves the state.
Vacation rentals on the coast and in the mountains
Much of North Carolina's exchange activity involves vacation property: Outer Banks cottages, Wilmington and Topsail condos, and cabins around Asheville and Boone. Three state-specific points:
- Personal use. A cottage the family uses for summer weeks may fail the investment test. The IRS safe harbor wants fair-rent rental of at least 14 days a year and limited personal use in each of the two years around the exchange.
- Local transfer tax. Selling in Dare County adds 1% to closing costs that the exchange cannot defer.
- Rental agreements. Many coastal rentals come with future bookings under the Vacation Rental Act. Deposits and rents for stays after closing are usually credited to the buyer, which can reduce the cash reaching your intermediary. Account for them in your replacement budget.
Moving into or out of North Carolina
North Carolina taxes nonresidents on gain from North Carolina real estate, even without withholding. Investors retiring to South Carolina or Florida can exchange North Carolina rentals into property in their new state to defer the tax, with no clawback to follow them.
Many new North Carolina residents arrive from the Northeast. Selling a rental left behind in New Jersey or New York triggers that state's nonresident tax and closing withholding; exchanging it into Charlotte or Triangle property defers both. Investors from California should expect the FTB 3840 filing to continue after the exchange.
Where North Carolina 1031 exchanges happen
Charlotte is the largest market, with multifamily, industrial and office property tied to banking and logistics; see our guide to a 1031 exchange in Charlotte. The Triangle of Raleigh, Durham and Chapel Hill trades in life science, office and build-to-rent communities; see a 1031 exchange in Raleigh. The Triad, Wilmington, Asheville and the Outer Banks add workforce housing, industrial and vacation rentals.
Federal 1031 rules in brief
After the sale you have 45 days to identify replacements in writing and 180 days to close, cut short by your return due date if it comes first. A qualified intermediary must hold the proceeds. Buy equal or greater value, reinvest all cash and replace retired debt to defer everything. Read our 1031 exchange guides and test your list with the 45-day identification validator.
Common North Carolina 1031 exchange mistakes
- Thinking no withholding means no North Carolina tax. Nonresidents still owe 3.99% on a taxable sale.
- Budgeting only the state excise stamp in Dare County. The 1% local land transfer tax is five times larger.
- Letting rental deposits leak out at closing. Credits for future bookings reduce exchange funds.
- Using the 2025 rate. 2026 sales are taxed at 3.99%, not 4.25%.
- Exchanging a family beach house with little rental history.
Start your North Carolina exchange with 1031 Specialists
We coordinate with your closing attorney, hold funds in a segregated account and track your deadlines. Start your exchange or book an intro call.
Frequently asked questions
What is the North Carolina capital gains tax rate on real estate?
North Carolina taxes capital gains as ordinary income at a flat 3.99% for 2026. There is no lower long-term rate and no local income tax.
How can I avoid capital gains tax on real estate in North Carolina?
A 1031 exchange into other investment real estate defers both North Carolina and federal tax, since the state follows federal AGI. A primary residence may qualify for the Section 121 exclusion.
Does North Carolina withhold tax when a nonresident sells property?
No state tax is withheld from individual sellers. The buyer files Form NC-1099NRS within 15 days of closing to report the gross sales price, and the nonresident reports the gain on a North Carolina return.
How much is the North Carolina excise tax on a deed?
It is $1 per $500 of the price, paid by the seller. Some counties, including Dare, add a 1% local land transfer tax. A 1031 exchange does not defer these taxes.
Does North Carolina tax deferred gain after I move away?
No. North Carolina has no clawback rule for gain exchanged into out-of-state property.
Sources
- NCDOR: tax rate schedules
- NCDOR: important notice for Form NC-1099NRS
- NCDOR: Form NC-1099NRS
- NC General Statutes Chapter 105, Article 8E: excise stamp tax on conveyances
- Dare County: land transfer tax
- NC General Assembly: S.B. 257 (2026 Appropriations Act)
- IRS: About Form 8824
Related: South Carolina, Virginia, Tennessee, Georgia and all 50 states.
This is general information on North Carolina and federal tax rules, not tax or legal advice. Confirm the details of your sale with a CPA or North Carolina attorney.
