Applying for and Maintaining the Ag Exemption in Texas

So, what is an ag exemption?

Well, an ag exemption is not really an exemption but instead is a special valuation. In simple terms, this means agricultural ranch landowners in Texas will have their property's taxes calculated based on productive agricultural value, as opposed to a market value of the land.

The idea of agricultural land valuation is literally rooted in the Texas Constitution and can equate to significant tax savings because, let's face it, any type of agricultural land is not cheap to maintain or operate.

Properties are eligible for ag valuations for the production of everything from honey to hay and can even be eligible for wildlife management depending on the location and rules of the county.

Ag valuations are not easy to get, so it's very important to keep and maintain them.

If an ag exemption or valuation is lost on a property, the current or new owners could be responsible for three to five years of rollback taxes, including interest. This can be a tremendous financial burden for brand-new landowners, so it is important to keep an Ag Exemption.

Qualification Of Land Under Section 1-D-1 (Open-Space) 

The Texas Constitution permits special agricultural appraisal only if land and its owner meet specific requirements defining farm and ranch use. The land for sale in Texas will not qualify simply because it is rural or has some connection with agriculture. Casual uses do not constitute agriculture, for example, a home vegetable garden. This is not considered an agricultural enterprise.

Section 23.51 of the Property Tax Code defines agricultural open space land as ".... being currently devoted principally to agricultural use to the degree of intensity generally accepted in the area."

Agricultural use includes but is not limited to the following activities: cultivating the soil, producing crops for human food, animal feed, planting seed, or for the production of fiber; floriculture, viticulture, and horticulture; raising or keeping livestock; raising or keeping exotic animals for the production of human food, fiber, leather, pelts, or other tangible products having a commercial value; and planting cover crops or leaving the land idle for the purpose of participating in any governmental program or normal crop or livestock rotation procedure. The term also includes the use of land to produce or harvest logs and posts for the use in constructing or repairing fences, pens, barns, or other agricultural improvements on adjacent qualified open-space land having the same owner and devoted to a different agricultural use.

The land must be currently devoted PRINCIPALLY to agricultural use

The land must be devoted to agricultural use to a degree of intensity that is typical in an area but is not abusive to the land or the vegetation. Overgrazing and abuse of a tract of land not meeting the typically accepted land stewardship practices will lead to a review of the 1-d-1 classification, and that classification may be removed at the discretion of the Chief Appraiser.

The land must have been used principally for agriculture or timber production for any five of the preceding seven years. Land within the boundaries of a city must have been devoted principally to agricultural use continuously for the preceding five years. The owner must file a valid application form in a timely manner.

Current devotion to agricultural use

The term "currently devoted", as applied here, means that the land must qualify on January 1. In the event that agricultural use is not evident on January 1, the Chief Appraiser should grant productivity valuation if the owner can show evidence that the land will be put into agricultural use and that agriculture will be the primary use for the majority of the calendar year.

Degree of Intensity

The degree of intensity will vary according to the type of agricultural enterprise and with the natural resources of an area. Kendall County has four major soil series and 19 soil types. The series and soil type plays a significant role in determining an area's agricultural production capability. Such things as soil depth, soil texture, and soil structure all play an integral part in the amount of forage produced and, therefore, the amount of vegetation that should be utilized. Stewardship can be defined as the wise use of a natural resource. Stewardship of the land is a must for all agricultural operations. Land abuse is unacceptable and can result in the land losing the 1-d-1 classification.

It is important to contact and speak with the County Appraisal District to verify the requirements to maintain the ag exemption, as certain aspects can vary from one county to the next. 

FREQUENTLY ASKED QUESTIONS

• What is the minimum acreage to qualify for ag exemption in Texas?

These requirements vary by county. But you will usually need a minimum of 10-15 acres to be eligible for ag exemption. These rules could also vary based on the type of agricultural activity. For example, if you're a beekeeper, you'll need a minimum of approximately 5-10 acres to qualify. Make sure to check with your county appraisal district.

• What qualifies as an ag exemption in Texas?

Only land that is primarily being used – and has been used for at least five of the past seven years – for agricultural purposes may qualify for an ag exemption in Texas. Agricultural purposes include crop production, livestock, beekeeping, and similar activities. Many counties have minimum acreage requirements, and some also consider the agricultural degree of intensity.

• Do horses count in ag exemption? 

Usually, if you breed or sell horses as part of your regular business, you might qualify. However, horse racing, showing, boarding, or training do not typically qualify for ag exemption. Make sure to check with your county appraisal district.

• How many animals are needed for Texas ag exemption? 

This will depend on your county's "intensity standards." Standards are established based on how many acres of land are necessary to sustain an animal unit (1 cow, for example, or 5 sheep). These will depend on an individual county's climate, since rainfall impacts how much land animals need to survive. Contact your appraisal district or the Texas Comptroller for your county's specific requirements. In Travis County, for example, you'll need at least 4 animal units. One unit could be 1 cow, 6 sheep, or 7 goats.

• How much does a Texas ag exemption save? 

This will depend on your county's individual tax rate, which varies. For example, you could save more than $2,000 on your property tax bill in Colorado County if you owned 15 acres of ag exempt land.

• How to buy ag exempt land in Texas?

It's helpful to work with a real estate agent who has experience with rural land and understands your county's acreage minimum requirements for ag exemption. Once you've found land to purchase, check to see if it already has an ag valuation. If so, be sure to maintain that valuation after purchase to avoid rollback property taxes. 

• What is the difference between an Ag exemption and a homestead exemption?

The difference between an Ag exemption and a homestead exemption is an Ag exemption is not really an exemption but instead is a special valuation. This means agricultural landowners will have their property taxes calculated based on productive agricultural values, as opposed to the market value of the land. Ag exemptions are only for land that is primarily being used for agricultural purposes. They are not easy to get and can be difficult to maintain.

Homestead exemptions in Texas, on the other hand, are easy to receive. They are a property tax break for homeowners living in their primary residence. Also different from Ag exemptions, homestead exemptions are easy to maintain because they do not need to be reapplied for once they are issued.

• What animals qualify for ag exemption in Texas?

Cattle, sheep, goats, and bees typically qualify for Special Ag Valuation. However, every county in Texas has unique rules and requirements. The best way to understand your specific opportunities is to contact the appraisal district in which your property is located. Begin by selecting your county here: https://comptroller.texas.gov/taxes/property-tax/county-directory/

• Do chickens qualify for ag exemption in Texas?

Traditionally appraisal districts will allow poultry to qualify a property for Special Ag Valuation, but many qualifications must be met, and those qualifications vary depending on the county and are subject to changes due to weather patterns. To locate the agricultural appraisal guidelines regarding chickens in your county, begin by visiting the Texas Comptroller's website.

• How many cows do you need to be tax-exempt in Texas?

The number of cattle or other livestock needed to qualify for a Special Ag Valuation is based on the intensity standards for each individual appraisal district. The intensity standards for an appraisal district are typically defined as the number of acres of land needed to sustain a grazing animal unit. (One cow is considered an animal unit, as is five sheep or goats in most cases.) The amount of acreage deemed adequate for an animal unit varies drastically by geographic location in Texas due to average rainfall amount, among other factors. Contact your local appraisal district to learn more and submit an application for Agricultural Appraisal.

*** Information Source: Kendall County Appraisal District