Save Money on Property Taxes: Agricultural Exemption or “Ag Exempt”
The Land Up Learning Series
If the ranch life, farm life or even beekeeping life is calling you, land is an important part of agricultural businesses and careers.
Current and aspiring landowners may have heard the term “agricultural exemption” or “ag exempt” being thrown around. While there are several types of agricultural exemptions, these specific types of property valuation can help agricultural landowners save money on their property taxes.
Owning, operating, and maintaining agricultural land isn’t cheap. Often, getting an ag exemption in Texas is well worth the effort. If you’re considering purchasing a piece of land with an ag exemption or are thinking about getting one for your current property, it’s important you understand just what that means - and how you can keep it for years to come.
Agricultural exemptions are a little known way to reduce your tax bill on your Central Texas Land
What is an Agricultural Exemption?
Typically when we hear the words “exemption” and “property” in the same sentence, it usually means that the qualified location doesn’t need to pay property taxes. In the case of an agricultural exemption, this is a special way to calculate your property taxes based on your land’s appraised potential agricultural income, rather than the market value.
What does all of that mean anyway? When becoming ag exempt, the land’s agricultural appraisal is calculated based on certain features of the property - including what’s being produced, the acreage, animals, and more. The appraisal looks at the land’s capacity to produce crops, livestock, timber, etc., in order to determine what the potential income - or “appraised productivity value” - could be.
A lot of the time, this number ends up being lower than the land’s market value. With an ag exemption, your property taxes are calculated based on the appraised productivity value - which can lead to significant savings. How much you can save really depends on a variety of factors. From location to market value to tax rates and more, numbers are different for each property.
Is My Property Eligible for an Ag Exemption?
The easiest way to find out if the land you’re interested in is eligible is to look at land for sale that is already ag exempt. But how can you determine if a piece of land qualifies? Or, if it already has an exemption in place, how can you make sure you continue to meet requirements?
Land must meet specific criteria for an ag exemption. The criteria can differ from county to county, so it’s important to work with a real estate agent that’s knowledgeable about land and the area. Your agent can confirm details with the county’s local tax assessor's office to see what qualifies as an agricultural exemption, as well as do research into your potential property to ensure eligibility.
In general, the land should:
be primarily dedicated to agricultural use, such as the production of crops, livestock, poultry, fish, timber, beekeeping, etc.
Have been devoted to agricultural production for at least five of the past seven years
Produce at the same intensity as is common in the area
Include more than 10 acres
Have one animal unit per 5-10 acres of improved land, depending on the county
Keep in mind that getting an agricultural exemption in Texas isn’t a one-time thing. Appraisals are done every couple of years. If at any point the land becomes non-agricultural, then the property owner who made these changes will owe a “rollback tax” - paying the difference in exempt vs. market taxes plus 7% interest for each year since the change. Needless to say, it can add up quickly and be a hefty cost, especially for new landowners.
How Do I Get Started?
After learning what qualifies as an agricultural exemption in the county and if your land is eligible, you will need to work with the Texas Comptroller of Public Accounts to submit an application, as well as the appraisal district in the county where the land is located. Even if you are purchasing a property that is already ag exempt, this valuation will need to be redone.
The agents at Land Up Realty + Investments are experts in land and the hill country area and are excited to help you through the process. They can also help you explore our inventory to discover properties that are ag exempt. Connect with us today to get started!