Q&A: Understanding Your Agricultural Land Appraisal

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It seems that every year, when a buyer or seller of land comes and sees us at Kurz Group to file their commercial real estate taxes, they consistently have the same questions regarding agricultural land. To tackle these questions head-on, we thought we’d break it down for you here in a simple Q&A.

How is the agricultural (AG) value calculated?

The AG value of land is based on its ability to produce agricultural products. This value is further determined by calculating the average net income the land would have yielded under smart management from the production of agricultural produce over the course of the past five years. [See Section 23.41(a) of the Texas Property Tax Code for more information.]

When is the AG application due?

The AG application is due by May 1 of each year. The individual claiming the right to have his land designated for agricultural use must apply for this designation every year in order to continue claiming it. If the individual fails to complete the application by May 1, he won’t receive the agricultural designation for that year. [See Sections 23.43(a-b) and 23.43(c) of the Texas Property Tax Code for more information.]

Can the application be filed past the deadline?

It’s up to the chief appraiser to approve or deny the filing of an application for an agricultural designation after the deadline has passed. If the application was filed before the approval of the records by the appraisal review board, there will be a 10 percent penalty if approved. [See Section 23.431(a-d) of the Texas Property Tax Code for more information.]

When is land eligible for AG use?

An individual is entitled to have his land designated for agricultural use if, by Jan. 1, the land has been:

  • Devoted exclusively to agriculture or the production of timber or forest products for five of the preceding seven years
  • Devoted or used principally as an ecological laboratory by a public or private college or university

[See Section 23.51(1-6) of the Texas Property Tax Code for more information.]

What happens when the use of the AG land changes? For example, if the land is developed for commercial or residential use.

If the use of the appraised AG land changes, an additional tax is imposed on that land. This property tax is equal to the difference between the taxes imposed on the AG land for each of the five previous years before it changed use, and the taxes that would have been imposed had the land been taxed on the basis of market value in each of those years. There will also be a 7 percent interest charge calculated from the dates when the difference would have been due. This is commonly referred to as “rollback taxes.” [See Section 23.55(a-o) of the Texas Property Tax Code for more information.]

Click here for more information regarding the Texas Property Tax Code.

Your property tax consultant can help answer your questions and provide real estate tax help. Contact Mark Vandagriff (mark@kurzgroup.com, 214/696-4656 ext.114) at Kurz Group today – he can help kick-start your real estate tax planning.

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