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Ag Exemptions and Why They Are Important

Closeup of crops on a farm

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.

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.

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 approximately 5-10 acres to qualify. Make sure to check with your county appraisal district.

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

  • 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 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:

  • 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 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. Contact your local appraisal district to learn more and submit an application for Agricultural Appraisal.

About the AuthorKevin Hemann

Kevin Hemann joined Texas Farm Credit in 2013. As a Washington county native, agriculture has played an important part in his life. Kevin strongly believes in community involvement and currently serves as a director for the Texas Land Brokers Network and is a member of the Central Board of Realtors. Kevin and his wife Shelly enjoy spending time with their two sons, whether it be on the baseball field or out hunting and fishing.

Cattle grazing with golden sky

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