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Bill Summary · HB 1122

Summary of HB 1122 (North Carolina, 2025 Session) – Expand Disabled Veteran Property Tax Exclusion

Purpose and intent

HB 1122 proposes to expand the disabled veteran property tax homestead exclusion in North Carolina. The bill aims to exclude the entire appraised value of a qualifying veteran’s primary residence from taxation (rather than a portion of value) and to create a mechanism for local governments to be reimbursed for the resulting revenue loss. The measure is designed to provide greater property tax relief to disabled veterans or surviving spouses meeting the qualifying criteria, while addressing the fiscal impact on counties and municipalities.

Key provisions and changes

  • Current framework (as amended by HB 1122):

    • The disabled veteran homestead exclusion currently excludes the first $45,000 of appraised value from property tax for a qualifying owner; holders of this exclusion cannot receive other property tax relief.
    • A qualifying owner is someone who is a NC resident, owns and occupies the permanent residence, and meets one of several definitions of disabled veteran (service-connected permanent and total disability verified by VA or eligibility under federal law; or death resulting from service-connected condition).

  • Expansion proposed by HB 1122:

    • The exclusion would be statewide, and for a qualifying owner, the entire appraised value of the primary residence would be excluded from taxation (i.e., 100% exclusion of the home’s appraised value, under the homestead rules).
    • The “hold harmless” mechanism would compensate local governments for the revenue loss from this expanded exclusion. The bill defines how to calculate and distribute these reimbursements.

  • Hold harmless and reimbursement mechanism:

    • Each county must report its total hold harmless amount to the Secretary of Revenue by September 1 each year; failure to report could bar reimbursement for that year.
    • The Secretary of Revenue would distribute the total hold harmless amount to counties by December 31.
    • Funds attributable to cities within a county or to other units/districts must be allocated accordingly.
    • The state would cover the reimbursement and administration costs by drawing from existing state collections.

  • Fiscal and administrative provisions:

    • The bill appropriates $100,000 in nonrecurring funds for the 2026-2027 fiscal year to administrative expenses related to implementing the hold harmless provision.
    • Section 1 (the tax exclusion) is effective for tax years beginning on or after July 1, 2027.
    • Section 2 (funding for administration) becomes effective July 1, 2026.
    • Other provisions become effective upon enactment.

Who is affected

  • Qualifying owners and their households: Disabled veterans (or surviving spouses meeting criteria) who own and occupy their North Carolina homestead would receive a 100% exclusion of the home’s appraised value from property taxes, subject to eligibility.
  • Local governments (counties and cities): Face revenue reductions due to the larger exclusion and are eligible for state reimbursements through the hold harmless program.
  • State and Department of Revenue: Responsible for administering the hold harmless reimbursements and related reporting, with modest initial administrative funding.

Procedural and timeline considerations

  • Effective date for the expanded exclusion: tax years beginning July 1, 2027.
  • Administrative funding authorized: July 1, 2026 (nonrecurring funds of $100,000).
  • Reimbursement program requires annual county reporting by September 1 and distributions by December 31 of each year.
  • The bill includes an ongoing mechanism to distribute funds to cities and other units as applicable and to offset administration costs from current collections.

Overall impact

HB 1122 would significantly broaden property tax relief for disabled veterans by eliminating the entire assessed value of their primary residence from taxation, offset by a state-funded hold harmless program to compensate local governments for expected revenue losses. The policy shift emphasizes enhanced veteran benefits while mandating a new administrative framework to manage reimbursements.

Compiled from official sources — confirm details with the bill’s official record.

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