“Ag Exempt” Status

These days it seems that taxes of every kind are on the rise, regardless of where you live, so it is not surprising that people are looking for ways to reduce their tax liabilities. While tax codes vary greatly from state to state and even county to county, here in Texas, many people are looking at Miniature Herefords as a way to gain or maintain an “Ag Exemption” on their property. These tax exemptions have become especially important as the sprawling ranches and farm lands are replaced with urban development and smaller acreage “ranchettes”. This “Ag Exemption” may result in a significantly lower property tax bill each year based on certain land use requirements but there are some factors one must consider (and stiff penalties!).

The most common “Ag Exemption” in Texas is actually not an agricultural exemption per say, but rather an exemption based on the ‘Open-space Appraisal 1-d-1’. This land appraisal method has three primary requirements:
the land must be primarily dedicated to agricultural use consistent with generally accepted practices in the area (relatively broad)
during 5 of the preceding 7 years, the land has been dedicated to agricultural, timber or forest production
the necessary form(s) must be provided to the appraisal office prior to May 1 for evaluation
The key word in the “Open-space Appraisal” method is agricultural USE. This can be defined as crop planting/production, raising livestock or exotic animals, wildlife management or land devoted to horticulture type use. With this type of exemption, the landowner’s primary business or occupation is not a factor, as the primary purpose of the exemption to preserve open space.

In Montgomery County, Texas, the minimum acreage requirements can vary based on the use, density, etc but when it comes to raising livestock, 20 acres is the minimum required for an exemption. The number of livestock head required varies (depending on type, breed, etc) and should be determined with your appraiser. However, one of the many attractions to raising Miniature Herefords is their efficiency (and easy keeping!) makes this type of exemption extremely viable on smaller acreage.

While commonly referred to as an “ag exemption”, the open-space appraisal differs greatly from a true “agricultural exemption” which is known as ‘Agricultural Use Appraisal 1-d’. This method requires that the primary occupation and income of the landowner be based on agricultural production. The land must be devoted to agriculture as the value of the land, and subsequent tax assessment, is based on the revenue associated with the property and its ability to produce agricultural products. Market value is not a consideration. An agricultural exemption must be applied for annually, whereas an open-space exemption remains in place until the use or category changes.

In either case, a landowner should contact their local county appraisal office for the specific regulations and requirements within their county (and state). A landowner should also be aware of the penalties associated with incorrect reporting and “rollback taxes”. Rollback taxes are applied when a change of use occurs on property previously under either ag related type exemption and include the past 3-5+ years of taxes at present market value. Rollback taxes can be quite substantial (and punitive at times), so if it important to be knowledgeable if you are considering purchasing property or a change of use.

While tax codes are rarely simple or straightforward, when it comes to “ag exemptions” it definitely pays to do your research and Miniature Herefords may just be the answer you are looking for!

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