Top 5 Taxes Homeowners Need to Know About

Top 5 Taxes Homeowners Need to Know About

  • Chris & Kevin Knapp
  • 10/2/22
Taxes are one of the few certainties in life. When you’re looking at Durham homes for sale, you might be thinking about the size of the bedrooms, the number of bathrooms, or the yard space. While you’re probably not thinking about the taxes, they are going to impact you throughout the year and come due every year.

Durham real estate comes in fairly average – North Carolina ranks 20th for best property tax rates in the United States. If you’re wondering which tax breaks you might get with your new purchase or how Durham real estate even handles property taxes, keep reading. This is everything you should know.

How are taxes calculated?

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First things first: you need to know how your taxes are calculated by the state. If you’re still looking at Durham homes for sale, your projected taxes are very important to consider before you sign on the dotted line since it’s a significant added expense.

The state of North Carolina calculates your property tax by taking the tax rate and multiplying it by the home’s taxable value, or what the property is assessed at. When you purchase your Chapel Hill or Durham real estate, your property is assessed to find the true value of it. That is the amount you pay taxes on.

So, if you own a home in Durham County, where most Durham homes for sale reside, your average county tax rate is – at the time of this writing, as the rate is always subject to change – going to be 1.060%. On a home with an assessed value of $350,000, you can expect to pay $3,710 annually. This is slightly higher than the North Carolina average of 0.820%, but lower than the national average.

Durham real estate needs to be reassessed every four years, which was changed from eight years in 2019.

It’s important to note there is no flat rate for the state. Instead, the county you choose to live in will determine the exact property tax you are paying. It’s just something to keep in mind – cross over into Orange County instead of Durham, and you will pay a bit more!

1. Property tax deduction

The most important tax deduction you should know about is the property tax deduction, which is available for anyone filing taxes this year, jointly or separately. Using this, you can deduct up to $10,000 for married couples filing jointly or $5,000 if married and filing separately from your property taxes. This applies to your primary home, but it will also apply if you’re looking at Durham real estate for a second home or a vacation home.

For most owners of Durham real estate, this will cover most if not all of their property taxes, making it tax deductible.

2. Necessary home improvements

If you’re looking at Durham homes for sale and wondering if that kitchen renovation or flooring change counts as a necessary home improvement, thereby making it tax deductible, you’re going to be disappointed. The government takes the term “necessary” pretty seriously.

However, if you’re considering Durham homes for sale and you need medically necessary renovations, such as the widening of doorways for a wheelchair, upgrades to a bathroom to make it handicap accessible, or installing a ramp or medical lift, those changes are tax deductible. If your upgrades are medically necessary, they apply!

3. Your private mortgage insurance

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Full disclosure: at the time of writing, the government has not stated this will 100% be included in the latest year’s filings. However, it has been extended each year since it has been established, and most tax experts expect this year to be the same.

This tax deduction was introduced in 2006 and means every mortgage insurance premium you make on your home will be tax deductible. If you’re considering one of the luxury Durham homes for sale, but you’re concerned about the mortgage premiums, this may help ease your mind. 

4. Property tax relief

There are two members of society who are eligible for property tax relief in North Carolina – those who are at least 65 or totally and permanently disabled and make less than the minimum income limit – which was set at $30,200 in 2019 – or disabled veterans. To be a disabled U.S. veteran who qualifies for a property tax relief for Durham real estate, you must be totally and permanently disabled in a service-related disability, though there is no age or income requirement.

For those who qualified for the elderly and disabled exclusion, the first $25,000 or 50% of the home's appraised value is exempt from taxation. For veterans, a flat $45,000 of the appraised value is exempt from taxes.

5. Home office deductions

Do you work from home? At this point, a lot of us do. One of the major reasons Durham homes for sale have been so in-demand in the past few years is that many companies started remote work permanently, and workers needed a dedicated home office space.

If you have such a space on your property, you may be able to deduct it from your taxes. The IRS is fairly strict with the requirements, but you can, in general, deduct five dollars per square foot of office space. If your dedicated work space is 200 square feet, you can deduct $1,000. The space must be used for business and not be used as a multipurpose space.

Are you thinking about buying?

Are you looking at Durham houses for sale and trying to find the perfect fit for you and your lifestyle? Reach out to the Welcome Home 919 Realty Group to get the process started today.

Chris and Kevin Knapp are one of the best duos of Durham real estate and work with the most luxurious and exclusive listings in the area. Whether you’re dreaming about a spacious Chapel Hill estate with plenty of yard to spread out or simply want a single-family home in Durham to call your own, these two experienced realtors would love to guide you every step of the way.

*Header photo courtesy of Pexels

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