Builders holding inventory for sale may be eligible for a North Carolina property tax exclusion that limits how improvements are assessed while a property remains on the market. The Builder Inventory Property Tax Exclusion can reduce tax liability on a home or improved land that is for sale or is planned to be put up for sale.
What Is the Builder Inventory Property Tax Exclusion?
First enacted in 2015 and later strengthened through advocacy by the North Carolina Home Builders Association (NCHBA), this law allows builders to exclude the increase in assessed value tied to certain improvements on property held for sale.
To qualify, the property owner must be in the business of buying property, making improvements, and reselling it. The property must be continuously held for sale and cannot be used as a rental or model home. The exclusion ends when the property is sold or when the applicable time limit is reached.
The intent is straightforward: Builders should not be taxed on increased assessed value from construction or subdivision improvements before a property is sold.
Which Properties Are Eligible?
The exclusion applies to both residential and commercial property held for sale by a qualifying builder, with different timeframes depending on property type.
Residential property (exclusion of up to three years):
- Single-family homes
- Townhouses
- Duplexes
- Subdivided or improved residential land
Commercial property (exclusion of up to five years):
- Applies to increases in land value from subdivision or site improvements
- Does not apply to buildings or other constructed improvements
Application Timing and Process
A key update to the law, effective beginning with the 2020 tax year, simplified the application process for the exclusion. Builders only need to apply once to receive the exclusion for the full eligibility period, as long as the property continues to qualify.
For newly improved property, the application must be filed by January 31 in the county where the property is located. Because procedures can vary by county, builders are encouraged to confirm that the exclusion is being applied correctly each year.
Why This Matters for Builders
For builders carrying inventory, property taxes are one of many ongoing costs that continue regardless of market conditions or sales timelines. When those higher taxes are based on increased assessed value tied to improvements and there hasn’t yet been a sale, the impact can add up over time.
“This is a technical provision, but it can meaningfully affect carrying costs for builders holding inventory,” said Megan Carroll, Executive Officer of the Builders Association of the Blue Ridge Mountains. “It’s worth taking the time to understand how the exclusion works and whether it applies to your projects.”
January is a particularly practical time for builders to review inventory and development activity from the past year. Properties that were recently improved, subdivided, or brought to market may qualify for the exclusion, and confirming eligibility early can help avoid missed deadlines.
Where to Get More Information
Builders should contact their local county tax office to obtain the appropriate application form. In some counties, the form may be available online. For additional guidance on the law, builders may also contact Steven Webb, Director of Legislative Affairs at NCHBA, at swebb@nchba.org.
