Keeping the Ag Exemption

Anonymous Poster · Aug 28, 2002

We bought our 12 acres several months ago and I've been researching the requirements to maintain an ag exemption on the property. It was undeveloped pasture and currently has the exemption in place until the end of the year. We will homestead our home on 1 acre, and use another 2 acres or so as our front/back yard areas, but that essentially means that we can keep 11 acres as ag exempt.

We do want to get some value out of the property - the county does allow you to use the land for hay/feed, so we will begin by going that route. We will also add some livestock "units" as they call them, but initially we've got enough to do, so the hay was the best solution for us.

Question - what do you suggest as the most reasonable method for cutting/baling? I don't have the baling equipment - should I hire this done, then sell the bales, trade cutting/baling for the bales, or ?

Sorry for the newbie questions, but you have to start somewhere! I'll be also heading down to the county ag extension office - they have been great to work with so far. They will come out and help/advise you on your plans, but I also wanted to get your real-world input to give me a better picture of this whole thing.

mikim · Aug 28, 2002

why are you only homesteading 1 acre? You can homestead up to 20 and still get ag ---- ( i think) I'd sure check on it anyway.
mike

cowboydoc · Aug 28, 2002

If it hasn't been maintained for awhile then it is going to be tough to get someone to bale it. You may have to about give it away for the first few years until you get the ground back in good shape.

If you don't have any equipment then your best bet is going to be to rent it out or get someone to bale it for a small fee. Maybe rent it for $10 an acre or something until you get it back in good shape. You may be able to find someone to do it for shares but it may be tough as the hay off of the ground isn't going to be much good if it's just been growing and not cut at all. It's basically just going to be filler until the grass gets back in good shape again. If you did hire it done and sold the bales you wouldn't be selling much to people.

Anonymous Poster · Aug 28, 2002

Thanks for your replies ....

My understanding after talking with the tax assessor's office is that you can homestead all you want, but it shows up as improved property on the tax roles. The 1 acre will be improved property since our home will be on it, and it will receive a different tax rate/value because of this. Their advice was to homestead only what you have to (1 acre minimum) to keep the tax rat low on the rest of the property. Drawback is that you have only protected that 1 acre of your property under homestead laws. I'm still sorting my way through this.

This 12 acres is actually all pasture in very decent shape, but I agree that more improvement is needed. I anticipitate that initially the hay will probably be a trade-off. You cut/bale, you get the hay. So far, we have mowed the front 3.5 acres or so along with a perimeter road all along the fenceline for truck access. I plan to go ahead and mow it all. That first mowing really made a difference in knocking down any large ant mounds and leveling out clumps of cow patties and grass. Maybe I'm imagining things, but the grass that has grown back since mowing looks more even and fuller???

mikim · Aug 28, 2002

I know there's a lot of ins and outs on this and I don't even pretend to understand it all -- but we just went through this with the in-laws in Bastrop and they made out better with homesteading 20 acres then they were with the 1 acre they did have it at. The ag exemption is close to 80% off your tax liability - and even though the 20 might be appraised at improved property rate - with homestead and ag exemptions on it - you could come out ahead - rather than only homestead on 1 acre and no ag on that acre -- lots of twists and turns in these tax laws -- maybe consult a lawyer? I know the people at the tax office weren't even as knowledgeable as my wife after her research in the particular subject area we were looking at - 'course that just made them p.o.'d at us so it became a bit of anti-productive for us. We thought about hiring a lawyer to fight over it - but the tax savings if we won probably wouldn't offset the cost of the lawyer and they'd just come after us again next year. oh well ...
mike

beenthere · Aug 28, 2002

What would you guess to be the difference in actual tax, with your plan of 1 acre for the house, and if the 1 acre was not separated?

Around here, one cannot dodge the assessor that way. It would all be classified only as residential, with the first two acres assessed at $23,000 per acre, and the remaining acres assessed at $2000 each. This happens even if you buy the property from a working farm, and do not have anything done to improve the property, such as a driveway, or buildings added. To get ag classification for assessment, a major portion of your income has to come from that land. This land acreage, with a 35 yr old ranch (1440 sq. ft.) home, totals about $4,550 per year tax (total assessed value of $197,000)

RanchMan · Aug 28, 2002

To get ag classification for assessment, a major portion of your income has to come from that land. 

WOW! /w3tcompact/icons/shocked.gif Sure glad it doesn't work that way here in Texas! If one goes for the ag exemption (via crops/livestock) the criteria is to meet the intensity requirements for what is "reasonable and customary" for the particular area. e.g. Land in West Texas can't support the same intensity of cow/calf pairs as, say land in East Texas. (and no, you can't put 1 cow on 10,000 acres and get your ag exempt status - that's where the "reasonable & customary" stuff comes in.)

If that "major portion of income" was present here in Texas, a lot fewer individuals would own farms/ranches as it is often requires continuous infusion of funds from another source (e.g. second income) for several years in order to push through (hopefully) the break even mark. (that, or only the independently wealthy or folks where the land has been in the family for generations could afford to "play cowboy.")

phalynx · Aug 28, 2002

I too am keeping up with this question as I am in the exact same boat that Chevdog is in. The only difference between he and I is about 30 miles.

I think I might want cows though. I figure a few walking hamburgers might be nice. I could name them, Patty, Chuck, and Dinner. I have no idea about cows yet. I am only just reading a book about them......

Fireman_dcb · Aug 28, 2002

Oof... There are a lot of things wrong with NJ, but one thing they remember is that this is the Garden State. As long as you bring in $500 per year you can keep your property in farmland assessment. This year I paid $30 on 9.96 acres and $2,700 on the remaining homestead acre. We have to fill out the farmland assessment form annually - we went with permenant pasture - a couple of horses and some beef cattle. Now if they can crank up the amount of money they put in for farmland preservation we here in NW NJ will be loving life. You might want to track down your county Ag. Coop person and ask for their input.
Good luck, Doug

lloydp · Aug 28, 2002

We went through this a couple of years ago. Decided on a Wildlife exemption instead of AG. Our property is close to ********* and all brush and trees so would be hard to keep track of the "units".

We had to do a Management Plan, but Wildlife Management guy came out and walked the property with us and wrote up the plan for us, just had to pick 3 or 4 of the options available to work on. Stuff like supplemental food, cover, preditor control. If the land was pasture though it wouldn't be as easy to do.

The hay question. When we were looking around Corsicana the real estate agent said he would recommend getting someone to cut and bale it for shares. Figure I kind of remember was 1/3 then you can sell the other 2/3s.

The extension office people do seem to be good to work with. If you are going to build a pond, or I guess it is "tank" in Texas, depending on the lay of the land there may be some assistance ($$) available if you build it to their specs. When we ask it was fall and they were out of money until after the first of the year. It turned out where we wanted the pond he didn't think it would hold water without a lot of work so they wouldn't have given us any money anyway.

karmakanic · Aug 29, 2002

Lloyd,
Could you tell me more about the wildlife exemption. We're in Texas also. We lost the AG exemption on our land cause we wern't generating any income from it, but we've been developing it on our own to enhance the wildlife, sure would be nice to get a tax break. After seeing your post, I'm going to call the extension service and see what they can tell me about it, but would appreciate any info from someone who's been there.

Thanks,
Dave Perry

RanchMan · Aug 29, 2002

Could you tell me more about the wildlife exemption.

I'm not Lloyd, but I'll give you some info..../w3tcompact/icons/wink.gif

Basically, the process goes something like this:

1) Get the wildlife management guideline info specific to your region of Texas. (downloadable in PDF format from the Texas Parks & Wildlife website)

2) Meet with a TPWD wildlife biologist to help you understand what makes sense to do with your land to increase wildlife. (This is optional, but adds weight when submitting to the tax assessor.) Your local tax office can tell you who is the TPWD biologist they commonly work with, or just contact TPWD and ask them who to use in your area.

3) Create a formalized wildlife management plan (document). This outlines what you will be doing. Technically it is the responsibility of the landowner, but some biologists or services will write it up for you if you think you can’t. (There are some examples you can utilize to write it up, so you aren’t completely alone when making one.)

4) Submit your plan and 1-d-1(w) paperwork to the county tax assessor for consideration & approval.

The link below is basically a premier of what is involved to qualify.
<A target="_blank" HREF=http://www.tpwd.state.tx.us/conserve/agland/>TPWD Wildlife Management Plan Qualification Guidelines</A>

Unfortunately lots of folks think the Wildlife Management exemption status ( 1-d-1(w) ) is a cheap and easy way out of paying taxes. Be forewarned - it is neither.

You'll still have to meet intensity requirements based on the activities you choose to conduct and have to do them on a continuous basis. (a $350 deer feeder on a couple of dozen acres isn't gonna cut it with the State.) Yes, you'll save $ overall, but just realize it isn't "free" either. Don't get me wrong, I'm a HUGE fan of the program, just wanna make clear that it requires real dollars and work to implement.

We lost the AG exemption on our land

Here's where you have a problem. /w3tcompact/icons/sad.gif

Basically, as you'll read in the primer of qualifying in the link I put above, you can convert land already in ag production (1-d-1) to wildlife, but not convert non-ag land straight to wildlife. Basically the law was written to encourage land purchased from existing ranchers/farmers to either remain in production or "go wild," not to convert land that has already been allowed to go out of production to get a tax break.

cause we wern't generating any income from it

/w3tcompact/icons/hmm.gif Sounds fishy. As long as you converted from a 1-d to a 1-d-1 and were meeting the intensity requirements for your type of production/locale, they should not have revoked your ag exemption. (1-d is the income based exemption, 1-d-1 is the intensity based exemption). 'Course if you weren't conducting any agriculture operations, only makes sense to revoke the status.

Hope this helps.

<A target="_blank" HREF=http://www.window.state.tx.us/taxinfo/taxforms/50-129.pdf>1-d-1 Agriculture Form</A>

bahia · Aug 29, 2002

we are in texas and when i bought a small 6 acre place i was concerned about an "AG" exemption also. as it turned out the place i bought had a history of ag production for more than 20 years prior to the 2 years that the party i bought from. so what i did was go to the appraisal district and explained to them that i wanted to use it for hay production exclusively and since it was not more than 2 years since the "AG" exemption had elapsed, they grant me a ag(1-d-1). if i would have waited any longer i would not be able to qualify for it and would have to prove production for 5 out of the next 7 years before qualifying. also they have standards for amount of cattle and other ag activities so bear that in mind. like someone else said, just having one cow does NOT qualify for and automatic exemption. also our appraisal district DOES do regular "drivebys" to make sure the land is really being used for the intended purpose. i think that is a good thing because it keeps the "deadbeats" from using the tax system to thier advantage while everyone has to pay. what it all boils down to is this: be honest with the authorities and do what you say you are going to do and you should be okay. most of the tax entities are reasonable people and will work with you and sometime cut a little slack for you if you have a problem. just be honest with them. be safe!

Anonymous Poster · Aug 29, 2002

My heartfelt thanks for all the replies - they are a huge help.

I do have the info from the county as to minimum requirements for the property to qualify for the ag exemption and you are right - 1 cow will not cut it. That was another reason for going with hay production - that's really what our property is best suited for anyway. Per the county, we would need 8 cows as a minimum and I want to have some time under our belt before I start looking for livestock. I might also consider leasing some portion for grazing, but the most streamlined way right now seems to point to hay production.

I don't want to start another topic here, but we have also gotten info on ponds from the county and they are very helpful. They will come out and help with location, sizing, design, etc. They also come out and check it for you after it's done. We also found out that there is some small amount of funding assistance depending on what the purpose is of the pond and how you stock it. Anyway, more on that later.

We have been very up-front with the county (hard to hide ignorance anyway) and they really have tried to be helpful in advising us on how to keep the exemption. My attitude is to be honest with them on what we want to do rather than try to weasel something by them. They have also been a great source of info from ponds to wildflower seeding, so no complaints here.

Like I said, thanks for your comments. I'll keep the printer going so I can read over them a few times. Takes more than once for the old brain to register /w3tcompact/icons/smile.gif

BB_TX · Aug 29, 2002

Chevdog - How about starting another thread on what you found out about the pond building. I am planning on having a pond built, but never even thought about the county helping plan, design, and maybe partially fund it. Is that thru the county extension service? I am also in Texas (Fannin County near Bonham).

RanchMan · Aug 29, 2002

These should keep you busy reading. Every thing from construction to stocking to diseases...

<A target="_blank" HREF=http://agprogram.tamu.edu/agropolis/animals/texasfish.html>Everything you want to know - hosted by Texas A&M</A>

<A target="_blank" HREF=http://www.dnr.cornell.edu/ext/fish/Pond/otherresources.htm?otherresourcesdoc.htm~mainFrame>Site with info from several different states</A>

hazmat · Aug 29, 2002

Ranchman, nice links, but you didn't credit my alma mater, CORNELL, for the second link /w3tcompact/icons/frown.gif

RanchMan · Aug 29, 2002

Sorry 'bout that - let's just say I'm a little more observant when it comes to things that are associated with <A target="_blank" HREF=http://www.tamu.edu/>A&M</A>..../w3tcompact/icons/wink.gif Probably best not to get me started on A&M or I'll probably go on for a lot longer than you want to listen..../w3tcompact/icons/smile.gif

"Give me an army of West Point graduates, I'll win a battle. Give me a handful of Texas Aggies and I'll win a war!"

--Gen. George S. Patton, Jr.

Anonymous Poster · Aug 29, 2002

Class of 78. /w3tcompact/icons/smile.gif

BBTX - will do, but let me get some more info from the county on this.

Thanks for the links - I will add those to my ever increasing ag folder.

PS - Scott, I found that Sealy concrete has the best pricing for fill, gravel, road base, etc. They are bringing out 56 yards of fill for the pole barn site for me to play with tomorrow. Sort of like the young days of Tonka Toys in the sandbox!

phalynx · Aug 29, 2002

Ooo, Ooo, Ooo. I wanna play, I mean work, too.. That sounds fun. I have the whole weekend off to "work" on my land.... I had heard that Sealy Concrete was a good place to get it from. I also heard they are always looking for Iron Ore which is what my dirt is...... perhaps..... hummmm....

On a side note, I visted Sealy Tractor and I would have to say that they are about as nice as can be and the pricing was great. He remembered you too....