Texas property tax law changes every few years. See the latest posts for the most up-to-date information.
A land tax exemption in Texas is a welcome advantage for most Texan property owners. Property taxes are one of the many expenses you must deal with as a property owner. Unfortunately, Texas property taxes only seem to be rising. Most property owners were surprised when they received their property appraisals this year. Some counties like Hays experienced a 53% increase in appraised property value compared to 2021.
With property values up, the tax bill is also more likely to be high when Texans receive their property tax bill in October.
Property Tax Exemptions to the Rescue
You can lower your tax bill by applying for various exemptions available to property owners in Texas. There are quite a few, but in today’s article, we shall focus on land tax exemptions in Texas.
Before that, what exactly is a tax exemption?
A property tax exemption removes a certain percentage or amount in dollars of your property’s appraised value from taxation. If you’re eligible for an exemption, you will pay lower taxes since the tax rate will apply to a lower taxable value once the exemption is applied.
For instance, if your home is appraised at $400,000 and you’re eligible for a $10,000 exemption, the local taxing unit will only apply the tax rate to $390,000($400,000— $10,000).
Related: A Checklist for Lowering Your Property Taxes in Texas
Types of Land Exemptions in Texas
Here are all the land tax exemptions in Texas you need to know:
1. Agricultural Land Tax Exemption in Texas
Texas’s Agricultural (Ag) exemption is also known as the 1-d-1 appraisal. The Agricultural exemption does not work like most exemptions, as you will see below. However, this exemption can significantly lower your property taxes.
Here are the most important things to note about the Texas agricultural exemption:
The Ag exemption is covered in Tax Code Chapter 23, parts C and D. This exemption allows some farms and ranches to be appraised on agricultural production value rather than the market value.
Primarily, appraisal districts appraise most properties based on the market value. For example, if the property market values a one-acre land with a single-family home at $7,000,000 in Dallas, then the appraisal district will appraise the house at this value or one very close to this.
With the Agricultural special appraisal, the CAD (Central Appraisal District) can appraise the land based on its capacity to produce agricultural products. Typically, the productivity value will be lower than the market value, which will lower the property taxes for the owner. The primary purpose behind the 1-d-1 exemption is for the Texas state government to encourage people to conserve open spaces, timberland, and wildlife land productively.
The special agricultural appraisal only applies to the agricultural land. Any other buildings on the land, such as bans and farm outbuildings, will be appraised based on the market value.
Ag requirements for acreage will vary from county to county. Some counties will require you to have a minimum of 10 acres. In others, 20 acres is the minimum to qualify for Ag land tax exemption in Texas.
What Type of Land Qualifies for the Agricultural Special Appraisal?
- The principal use of the land must be devoted mainly to agriculture: Agricultural activities can include: raising or keeping livestock, cultivating the soil, producing crops, planting cover crops, etc. Raising certain exotic animals for human food and other commercial value might qualify land for special appraisal.
- The land should have been used principally for agriculture or timber production for at least 5 of the past seven years. However, suppose the land is within an incorporated city or town. In that case, it must have been used principally for agriculture for the preceding five years as long as it did not receive equal city services as other comparable lands in the city or town.
How Do Appraisal Districts Conduct Special Ag Appraisals?
As stated earlier, the special appraisal means appraising the land based on its production value, not the market value.
When calculating the production value, appraisal districts total the income from the land, then subtract expenses such as property taxes, cost of fencing, and development of irrigation wells. The result is what’s known as the net-to-land.
Next, the appraisal district divides the average net-to-land for the last five years by the annual cap rate. This final result is the productivity value of the agricultural land.
The 2022 cap rate is 10% for open space agricultural land and 6.85% for timberland.
What if the Land Is No Longer Used Principally for Agricultural Purposes?
If a property owner ceases to use the land for agricultural purposes mainly, they will be subject to rollback taxes. The rollback taxes will apply for the previous three years in which the land received a special appraisal.
Rollback taxes are the difference between what a property owner would have paid if the assessor appraised the property based on market value versus what they paid when the land was appraised based on agricultural production value.
But you can avoid the rollback tax if the land:
- Can be sold right away
- Is transferred to a state subdivision for public use
- Is transferred from a state, political subdivision, or qualified nonprofit to an individual for economic development
Like with most exemptions, you must apply for the Ag special appraisal. You should make the application before MAY 1 using form Form 50-129(PDF). The form includes further details regarding deadlines and submission information. An agricultural special appraisal warrants just one application, but you might need to reapply if the chief appraiser requests for one, ownership of land changes, or eligibility ends.
If you miss the application deadline, you might still apply late as long as it’s before the appraisal review board approves that year’s application. You will be penalized if your property is approved and you make a late application. This penalty will equal 10% of the difference between the tax imposed at market value and the tax imposed at productivity value.
Failing to notify the appraisal district that land is no longer used principally for agriculture might subject you to a penalty. The penalty will be equal to 10% of the property taxes for each year the property is erroneously appraised.
2. Wildlife Exemption
The second land tax exemption in Texas is the wildlife exemption. To qualify for this exemption, the land must:
- Have previously qualified and received a special agricultural appraisal for open land or timberland the year before it becomes a wildlife management land. For instance, if you want to qualify for Wildlife management use in 2023, you must prove your land qualified for agricultural use in 2022 and appraised under the same.
- Be currently used for wildlife management to propagate a sustaining breeding, migrating, or wintering population of indigenous wild animals.
The landowner should propagate the wildlife for human use (meat and medicine) or recreational use such as bird watching. The owners’ passive enjoyment of owning the land and animals can also qualify as legitimate wildlife management use.
There’s no acreage requirement to qualify for a wildlife exemption. But, if the acreage has been reduced since the previous tax year, there will be a minimum acreage requirement.
Furthermore, you must use wildlife management land in at least 3 of these seven ways to qualify for the land tax exemption in Texas.
Habitat Control— Actively using the land to ensure the environment is safe and beneficial to wildlife
- Erosion Control— Actively attempting to reduce soil erosion
- Predator Control — Actively control predators to ensure the wildlife continues. Predator management is unnecessary unless predators are in large numbers to threaten the continuity of wildlife.
- Providing Supplemental Water Supplies — Providing additional water sources on top of natural water sources
- Providing Supplemental Food Supplies — Actively providing food to wildlife on top of what is naturally available for the wildlife to feed on
- Providing Shelter— Actively maintaining or creating vegetation or artificial structures to protect wildlife from harsh weather and for breeding.
- Making Census Counts to Determine Population— Having periodic counts to determine the number of wildlife and ensure that management practices are benefiting the target wildlife group
Like Texas’ agricultural land tax exemption, you should make the wildlife land exemption application before MAY 1. Late submission will also attract penalties as applied in the Ag land tax exemption. You also need to submit a wildlife management plan while making your application.
You can find all the forms you need to make your application on the Texas Wildlife and Parks Department Website.
Related: What You Need to Know About Exemptions for Texas Homes
3. Homestead Exemption
If you do not qualify for the land tax exemptions in Texas we shared, you have one more way to lower your taxes: the homestead exemption.
This exemption is for a property owner who uses a particular property as their primary residence. The current 2022 homestead exemption is $40,000. So, if your property is valued at $450,000 by the appraisal district, the tax rate will only apply to $410,000, as opposed to $450,000 if the exemption was unavailable.
However, if you have a homestead on the open agricultural land, you can only qualify for either the Ag exemption or a homestead exemption, not both.
One More Less-Stressful Way to Lower Your Texas Property Tax
Property taxes in Texas are one of the expenses you must deal with as a property owner. You can significantly lower your tax bill by applying for a land tax exemption in Texas. However, if you feel your property tax is still high even after exemptions, you can get help from a property tax expert.
Property tax experts here at Home Tax Shield can help you keep your taxes even lower by aiding in the tax protest process. We rely on the power of data, AI technology, and skilled tax professionals to walk you through the entire tax protest process.
Sign up today to get help with the cumbersome process of protesting taxes.