Important Tax Considerations
Gaining or maintaining an Agricultural Use Tax Exemption (Ag) on a property in
Gillespie County is a critical consideration for anyone seeking to buy farm, ranch or recreational real estate in the Fredericksburg area. The following information is a summary of what it takes to receive an exemption but by no means is it intended to be a primary source of information on this subject. For a complete understanding of this important tax issue, contact the Gillespie Central Appraisal District (830-997-9807).
The main reason for getting this exemption, of course, is that it qualifies a landowner to be taxed at a rate that is roughly equal to $1/acre (e.g. is someone owns 100 acres, non-exempt, and the land is worth $100,000, the taxes due would be approx. $297 vs. $100 if the property qualifies as “Ag”).
A property owner must file an application for a 1-d-1 (Open-Space) Agricultural Appraisal between January 1 and April 30 of the tax year (there are provisions for late filings). Once the application is submitted to the Appraisal District and approved, the land continues to receive agricultural appraisal until ownership of the land changes, the land’s eligibility changes, or the Chief Appraiser requests a new application (i.e. the valuation is challenged).
Agricultural appraisal applies only to land. Improvements (such as buildings, barns, silos, homes, etc.) are appraised separately at their market value (as are minerals). Agricultural products (livestock, fruit, vegetables, grains, etc.) in the hands of the producer are generally exempt from taxation.
In addition to having qualified land receive agricultural valuation, the agricultural operation must pass four separate tests. These include primary use, current use, intensity and time period tests. All tests must be passed to qualify. The time test is particularly important as the land must have been used principally for an agricultural use for any five of the preceding seven years. If an owner shows the required five-year history through previous applications and supporting documentation, they would be eligible for Ag use in the sixth year.
Another exemption gaining favor is the Wildlife Management (WM) exemption. The first criterion of WM use is the land must currently be under Ag valuation. Second, the landowner must be actively using the land at the time the WM began was appraised as qualified open space land in at least three of the following ways to propagate a sustaining breeding, migrating, or wintering population of indigenous wild animals for human use: habitat control, erosion control, predator control, supplying supplemental water or food, providing shelter and making census counts to determine populations.
Leases are an acceptable agricultural use for the owner of the property provided the lessee is using the land to the standards of agricultural use for Gillespie County.
Landowners need to be aware that if land receiving Ag valuation changes use to a non-Ag use then a “roll-back” tax may be imposed. The roll-back tax is a penalty for taking the Ag land out of production. Roll-back taxes will be assessed for the previous five years (if the land received Ag use for the previous five years). The roll-back tax is the difference in actual taxes paid based on productivity value and taxes that would have been paid at market value. There is also a 7% annual interest penalty added to each of he five years!
