North Carolina taxes capital gains as ordinary income — up to 3.99% — stacked on top of federal tax, so selling appreciated real estate can cost roughly ~27.8% of the gain. A 1031 exchange into a Delaware Statutory Trust lets North Carolina investors defer that combined bill and trade active landlording for passive institutional real estate.
The North Carolina tax math
Here's the tax stack on a long-held rental sold for a $1.5M gain (excludes depreciation recapture, taxed separately at up to 25%):
| On a $1.5M gain | Tax |
|---|---|
| Federal long-term capital gains (20%) | $300,000 |
| Net investment income tax (3.8%) | $57,000 |
| North Carolina income tax (3.99%) | $59,850 |
| Total if you simply sell | $416,850 |
| Tax if you 1031 into a DST | $0 deferred |
In North Carolina's top bracket, roughly the combined rate above goes to tax if you sell outright — versus $0 now with a qualifying 1031 exchange. Run your North Carolina numbers →
North Carolina 1031 rules
Rules summarized as of 2026 — verify with your tax advisor.
Conforms to federal §1031
North Carolina conforms to IRC §1031, so a qualifying exchange defers North Carolina tax as well as federal tax.
Withholding at sale
North Carolina may require nonresident withholding at closing; a qualifying 1031 exchange generally defers it. Confirm specifics with your closing agent.
How gains are taxed
Taxed as ordinary income — up to 3.99%.
North Carolina market snapshot
Illustrative — wire to a market-data feed; refreshed quarterly.
Baker 1031 in North Carolina
Realized (acquired, held, sold) programs on North Carolina assets. Joined from full-cycle-deals.csv; sponsor-reported, net-to-investor, not independently verified; past performance ≠ future results.
| Program | Sponsor | Avg annual | Equity × | Hold |
|---|---|---|---|---|
| USA Self Storage I, DST — GA | Blue Door | — | — | — |
| Residence Inn – Southern Pines, NC — Southern Pines | Peachtree Group | 11.30% | 1.91x | 6.48 yr |
| Dollar General – Charlotte, NC — Charlotte | Four Springs | 7.75% | 1.15x | 1.99 yr |
| Dollar General – Elizabeth City, NC — Elizabeth City | Four Springs | 7.50% | 1.13x | 1.68 yr |
| Dollar General – Eden, NC — Eden | Four Springs | 8.00% | 1.18x | 1.47 yr |
| Advance Auto Parts – Garner, NC — Garner | Four Springs | 7.50% | 1.12x | 1.53 yr |
| Meadowmont — Chapel Hill | Bluerock | 24.50% | 2.41x | 3.5 yr |
| The Stratford — Cary | Bluerock | 22.90% | 1.49x | 1.42 yr |
See every North Carolina deal in the Data Center →
Current offerings for North Carolina investors
| Offering | Sponsor | Type | Status |
|---|---|---|---|
| BR Churchill Downs, DST | Bluerock | Multifamily | Limited Availability |
| Government Lease Holdings 2 DST (GLH 2 DST) | Net Lease Capital Advisors | GSA | Available |
| NexPoint Waterford DST | NexPoint | Multifamily | Available |
| Passco Preston Ridge DST | Passco | Multifamily | Available |
| IREX IV Industrial Portfolio DST | Invesco | Industrial | Available |
DST sponsors based in North Carolina
Learn more
North Carolina FAQ
What is the capital gains tax rate in North Carolina?
North Carolina taxes capital gains as ordinary income, up to 3.99%, with no separate long-term rate. Combined with the federal 20% rate and the 3.8% net investment income tax, a high-bracket North Carolina seller can face roughly ~27.8% on a real estate gain.
Does North Carolina recognize 1031 exchanges?
Yes. North Carolina conforms to IRC §1031, so a properly structured exchange defers North Carolina tax as well as federal tax.
Why use a 1031 exchange in North Carolina?
To defer the tax on a large gain (up to about ~27.8% combined) and move from active landlording into passive, professionally managed real estate while keeping your full equity invested. These are Regulation D offerings for accredited investors.
Disclosures
This page is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. State tax and 1031 rules summarized here are general, current as of 2026, and not tax advice — verify with your CPA and attorney. For accredited investors only. Representatives may transact business only in states where registered or exempt. Securities offered through Aurora Securities, Inc., member FINRA/SIPC; Baker 1031 Investments, LLC is independent of Aurora. Performance shown is sponsor-reported, realized programs only, net of fees, not independently verified, and not indicative of future results.