Selecting Real Estate

When many people start looking for a new home, they wonder what they should choose and how much of an investment it will be. Although many people aren't quite sure about what their new home will look like, the fact of the matter is that there are many aspects to be mindful of when it comes to real estate. From paying attention to how much things cost to looking carefully at your options, it really pays to understand and apply a little wisdom before you break ground on a project. Check out these posts to find out great tips about real estate.

How Can Differential Property Tax Assessment Help Your Farm Save Money?

Real Estate Blog

To say the last few years have been rough for many American farmers would be a huge understatement, so it's no surprise that many farmers are turning to financial services such as tax consultants to help get their finances in order. However, many farming professionals miss a golden opportunity to lower their expenses by having their property taxes reassessed.

Differential property tax assessment is one of the best ways any farming operation can lower its annual tax bill. In the hands of a skilled property tax consultant, this unique property tax rule can make your annual bills much smaller and easier to handle.

Why Do Some Farmers Pay Too Much In Property Tax?

The property tax paid by most landowners is calculated based on the value of the land they possess. This tax rate is calculated based on how much the land would be worth if it was used in the most profitable way possible; this principle is known as "highest and best use."

However, agricultural operations are rarely (if ever) the most profitable way to make use of a parcel of land, even if the land is located in a very rural and isolated location. The base rate of property tax is usually calculated based on how much the land would be worth if it were used for commercial or residential development, such as constructing a new mall or residential suburb. 

The difference between how much your agricultural land is worth and how much it would be worth to a developer can be enormous, especially if you own unused land which is yet to be developed or cultivated for agricultural use. A farm owner who pays the standard property tax rate could unknowingly be overpaying the IRS by hundreds or even thousands of dollars a year.

What Is Differential Property Tax Assessment?

Under differential property tax assessment rules, the amount of property tax you pay on your agricultural land is calculated based solely on its value as agricultural land. The potential development value of your land is discounted.

Farms also make less use of municipal services (such as sewer lines) than a commercial or residential plot of equivalent size. The amount of service tax you pay will also be reduced accordingly under differential property tax assessment rules.

As you can imagine, this relatively straightforward tax rule can take a huge chunk out of your annual property tax bill. It is particularly useful to farmers with large-scale staple crop farming operations, such as corn crops. These crops require a lot of land but provide very little profit per plant, and land used to grow these crops is worth substantially less than its development value.

Farms located close to growing urban and suburban centers can also save a lot of money using differential property tax assessment. The cost of land in these locations can rise dramatically year to year, so having your property tax regularly reassessed by a professional tax consultant can prevent sudden, unexpected property tax hikes. Reach out to a property tax consultant to learn more. 


12 October 2020