Ag Exemptions and Why They Are Important

This content has been updated as of September 2024.

The type of properties we lend on are as diverse as our group of borrowers. We offer products for individuals that thrive in the hustle and bustle of the city as well as those that need a little more wide-open space.

To serve our clients that live on acreage, we here at Texas Farm Credit have some unique products and guidelines. One of the principals we feel really separates us from traditional mortgage lenders is that we allow agricultural exemptions to remain on the property.

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 landowners will have their property’s taxes calculated based on productive agricultural value, as opposed to 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. Many counties have their own appraisal district websites that outline specific eligibility criteria for agricultural valuations, including the types of production (like honey or hay) and wildlife management. 

State Agricultural Departments often provide detailed guidelines on agricultural valuation and property tax exemptions. Texas A&M Extension Service provides guides and fact sheets on valuations and eligibility. 

At the local level you can consult with the county government officially such as the tax assessor’s office. This route will provide the most up-to-date information on eligibility and requirements to any specific area.

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

The next question we often get is: Why do other lenders ask for the exemptions to be removed?

All we know is that 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 – which is why we work so hard to help our borrowers keep their exemption.

Long story short, Texas Farm Credit understands the significance of ag valuations for our customers and the future of the Texas agricultural industry. We ensure that all our mortgage products allow ag exemptions to stay in-tact, and the only thing our customers have to worry about is how to make a little slice of Texas feel like their perfect home.

If you are interested in learning more about Texas Farm Credit and the products, we offer – give us a shout. We’d love the opportunity to work with you!

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 agriculture activity. For example, if you’re a beekeeper, you’ll need a minimum of five acres and six hives for the first five five acres coverage. Additional hives are covered up to 20 acres maximum. Make sure to check with your county appraisal district.

• What qualifies as ag exemption in Texas?

Only land that is primarily being used for agricultural use for farming or ranching activities, such as crop production, livestock production, dairy farming, beekeeping, aquaculture, and/or horticulture. The land should be used for at least five of the past seven years to maintain the exemption and meet minimum acreage requirements. The Texas Property Tax Code requires the land to be used in a manner consistent with the production of income, even if the income is not significant.The land should not be used primarily for non-agricultural purposes, such as commercial enterprises, or recreational uses.

• Do horses count in ag exemption? 

This is one of the more specified areas of exemptions. The short answer is yes, horses can qualify but must meet the agricultural-specific conditions. The animals must be kept for activities like breeding, training, or active working partners on the ranch or farm. Keeping them for recreational purposes is not included. Keep thorough records of how the hoses are used and if any income is generated to iterate the usage. Make sure to check with your county appraisal district.

• How many animals are needed for Texas ag exemption? 

There is not a one-size fits all standard and 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, the value of the land, and how the land is categorized under the specific exemption in comparison to market value. For example, there is a market value and ag value, which is typically significantly lower than the market value. The tax is then calculated on the ag value at the local tax rate. In Colorado County, if owned 15 acres of ag exempt land, you could save more than $2000 on your property tax bill. 

• 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. Learn more about how to buy ag exempt land in Texas here.

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

Agricultural exemptions and homestead exemptions serve different purposes and 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 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, horses, sheep, goats, poultry, swine and bees are among the most common that qualify, 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 and along the lines of other livestock, qualifications must be met. Some appraisal districts may require a formal application, documentation, and inspection of facilities. In some cases, may end up requiring a different classification of land. Begin the inquiry process 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 5 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.