Farmland Taxes and Agricultural Exemptions

Why is farmland often taxed differently?

Many states have a program that assesses qualifying farmland based on its agricultural use rather than what it might sell for to a developer. The idea is to keep working farms from being taxed out of business as nearby land grows in value.

Each state sets its own rules, and counties administer them. I cannot tell you what yours requires, and neither can a general article, so treat the questions below as a checklist for your own research.

Because the rules are so local, the best first step is a short call to the assessor's office, with your parcel number in hand.

What do these programs commonly look at?

Programs commonly look at acreage, how the land is used, how long it has been used that way, and sometimes income from farming. Some require an application or yearly renewal, and some require records.

Do not assume a past owner's status carries over to you. Many programs require a new filing when ownership changes, and missing a deadline can have consequences.

Ask whether the program counts woodland, wetland, farm roads and the ground around buildings, since these small acreages are where people often get surprised.

• Minimum acreage or income tests, if any
• Application and renewal requirements
• How rented land is treated
• What happens if land use changes
• Rules for woodland, pasture or idle ground

Who do you ask?

Your county assessor or tax office is the starting point for property tax questions, since they apply the local program. Your state department of revenue or agriculture can explain the state rules.

For questions about income tax on farm earnings, expenses and sales of land, talk to a tax professional familiar with agriculture. The IRS publishes guidance for farmers, and a preparer can tell you how it applies to you.

If you cannot reach the right person, your county extension office can usually point you toward the correct desk.

What are rollback or change of use penalties?

Some programs have a back tax or penalty if land leaves agricultural use, such as when it is sold for development or a house is built. These can be significant, and the rules about when they apply vary.

Before you subdivide, build, sell part of a farm or change how land is used, ask the assessor how the change affects your status. Getting the answer in writing is smart.

These rules exist to discourage people from claiming farm status for land that is not really farmed, so expect to be asked to show how the land is used.

What about farm buildings and homes?

Farm buildings, equipment and homes may be taxed under different rules from the land itself. A farm home usually sits outside agricultural land assessment, but practice differs.

Look at your tax bill and ask the assessor which parts are land, which are buildings and how each is valued. If you think a valuation is wrong, there is usually an appeal process with a deadline, and the assessor's office can tell you how it works.

Calendar the appeal window as soon as your bill arrives, because it is usually short.

How should you keep records?

Good records make everything easier. Keep copies of deeds, leases, maps, tax bills, crop and livestock sales, and notices from the assessor. Photographs of how land is used each year are cheap proof.

If you rent land to or from someone, a written lease helps show who is using the land and for what. An accountant can set up a simple system that fits your size.

What mistakes do people make?

The most common ones are missing a renewal deadline, assuming an old status continues after a purchase, and not asking before changing land use. Another is following advice from a neighbor in another county.

Make a calendar of deadlines, keep your assessor's phone number handy, and contact them early with questions. Offices are generally more willing to help before a mistake than after.

Last reviewed: November 12, 2026. Written by the Rural Farm Life Editorial Team. See our editorial policy.