Hot Topic: Farm Land Assessment for Property Taxes

Farm land is the only big part of taxable property that is not assessed at market value. It's assessed at its "use value," its value as farm land. This means that even if the land is worth a lot because it could be developed for housing or retail, its owner pays taxes based only on its value in farming. This is a terrific tax break for farmers, especially those near cities where there is development potential.

But farm land assessments and property taxes will be going up soon, pretty substantially. That's because the "base rate" will be increasing.

Farm land assessments start with the statewide base rate, which was set at $1,290 per acre for taxes in 2011. For the assessed value of any acre of farm land, the base rate is adjusted up or down with soil productivity, and adjusted down for other factors like flooding or forest cover. The result is multiplied by the local tax rate to determine the tax bill.

The base rate has bounced up and down (mostly up) in this decade. Before the reassessment of 2002-03, the base rate was $495. It more than doubled in that reassessment, to $1,050, and farm land owners saw their property taxes increase substantially. The base rate was cut to $880 per acre for 2006 and 2007 taxes. That was a tax break for farmers. Since then the base rate has increased, and will be $1,290 for taxes in 2011, and $1,500 for taxes in 2012.

We can predict pretty confidently that the base rate will rise quite a bit for taxes in 2013 and 2014. Recent high corn and bean prices, plus low interest rates, will start affecting the base rate. It could rise by about 40% from 2010 to 2014.

That's not as much as it would have risen, though, thanks to legislation passed by the General Assembly in March 2010. Senate bill 396-2010 changed the way the base rate is calculated, to the benefit of farm land owners. The result is not exactly a tax cut: just a smaller tax increase.

Want to know more?

To Find: Go To:
An essay about how farm land is assessed in Indiana, how this affects tax payments, and how farm land assessments are likely to change in the future. Farm Land Assessment for Property Taxes
Capital Comments columns about farm land assessment (check January columns since 2007, plus the March 2010 column). Capital Comments columns