Reduced property assessments a useful tool for farmers
Farmers and others that use their land for agricultural purposes have the opportunity to reduce their annual property taxes throughout Delaware and Maryland and in select jurisdictions in Virginia.
All counties in the Delmarva offer programs to reduce property taxes for ground that is utilized for a variety of agricultural pursuits.
Your ability to pay reduced annual property taxes is based on a reduction in the property assessment of your real estate. This is a detailed process.
Each of the three states has different regulations regarding this matter. It is recommended farmers and landowners consult with an accountant, real estate attorney, or another professional familiar with the specific requirements in your community.
“In Maryland, the state government controls the property assessment process through offices in each individual county and Baltimore City,” said Dan Phillips, state supervisor of the Real Estate Division of the Maryland Department of Assessments and Taxation. “In general, farmland is assessed at $500 per acre in Maryland, while woodlands are assessed at $187.50 per acre in the state.
Some real estate parcels have lower property assessments because their property assessments are grandfathered in from previous years because of continued agricultural use.”
There are a variety of provisions within the property assessment regulations in Maryland.
The farmland must be actively farmed. Properties enrolled in forest management efforts must include at least five acres, for example.
As with all other properties in Maryland, permanent buildings on agricultural lands are reassessed on a three-year cycle. An interesting item for farmers to consider: In general, hoop structures are not assessed as permanent buildings if only the frames are kept up year-round and they are not enclosed most of the time.
According to the State of Maryland, reduced property assessments for agricultural uses are provided “…to foster and encourage farming activities to maintain a readily available source of food and dairy products close to the metropolitan areas of the state, encourage the preservation of open space as an amenity necessary for human welfare and happiness, and prevent the forced conversion of open space land to more intensive uses because of the economic pressures caused by the assessment of the land at rates or levels incompatible with its practical use for farming.”
An agricultural transfer tax is assessed when properties in Maryland are sold for purposes other than agricultural uses. Funds generated from this tax, Phillips noted, are used to buy conservation easements as well as open space and woodland tracts for public use.
More information on the Agricultural Use Assessment can be viewed at https://dat.maryland.gov/realproperty/Pages/The-Agricultural-Use-Assessment.aspx. More information on the Agricultural Transfer Tax can be viewed at https://dat.maryland.gov/realproperty/Documents/agtransf.pdf.
“There are two primary property tax benefits available to all farm and forest land owners in Delaware,” said Jimmy Kroon, administrator for the Delaware Department of Agriculture’s Aglands Preservation and Planning Section. “Land that is in agricultural production, including field crops, vegetables, fruit, animals, horticultural plants, horses, and more, is eligible to enroll in Farmland Assessment.
“Farmland Assessment provides a property tax exemption for qualifying land.”
While the exemption is not 100 percent, Kroon said Farmland Assessment is provided by state law but left to the counties to administer as they are the ones collecting property taxes. “To qualify, the landowner must show that the farm produces at least $1,000 per year in revenue if it is over 10 acres,” he said. “If under 10 acres, then it must produce at least $10,000 per year. Removing a farm from farmland assessment (i.e.: developing it) causes the landowner to be assessed rollback taxes, which means the county may charge up to 10 prior years of exempted property tax at the time of conversion.”
The second program focuses on woodlands in Delaware.
“The Commercial Forest Plantation Act is similar to Farmland Assessment, but for wooded properties,” Kroon said. “It provides the same tax benefit to woodlot owners. The difference is that CFPA is administered by the counties with cooperation of the Delaware Forest Service. A revenue-based qualification is difficult for woodlots that may be harvested once a generation, so instead CFPA requires inspection by a Delaware forester and that the landowner agree to manage the woods under a forest management plan that the forester helps them draft.”
Kroon added “almost 100%” of farms and woodlots in Delaware are enrolled in one of these programs.
“A third tax benefit is specifically for farms and woodlots enrolled in our Aglands Preservation Program,” added Kroon. “Land enrolled in Aglands Preservation is exempted from transfer tax at time of sale, which would normally be 4 percent of purchase price and split between the buyer and seller.”
Reduced property assessments are available to farmers and owners of land engaged in agricultural activities in select jurisdictions in the Commonwealth of Virginia.
“The legislature established a program to allow special assessment of eligible land by any county, city or town that has adopted a land use plan and an ordinance to participate in this program,” said Jennifer Nelson, a spokesperson at the Virginia Department of Taxation. Both Accomack and Northampton Counties participate in Virginia’s Land Use-Value Assessment Program.
In addition, “there are a number of agriculture and farming tax credits in the Commonwealth,” said Heather Cooper, Director of Communications and Public Relations at the Virginia Department of Taxation.
Detailed information on Virginia’s Land Use-Value Assessment Program can be viewed at https://luva.aaec.vt.edu/. Detailed information on Agriculture and Farming Credits offered by the Commonwealth can be viewed at https://www.tax.virginia.gov/agriculture-and-farming-credits.