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.

Farm land assessments start with the statewide base rate, which was set at $1,140 per acre for taxes in 2008. 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, and after credits are subtracted, that’s what the landowner pays.

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. It increased to $1,140 for 2008 taxes, and will rise to $1,200 for taxes in 2009. And we can predict pretty confidently that the base rate will rise some more for taxes in 2010 and 2011.

Why the changes? Lots of reasons: the method for setting the base rate has changed. We've begun updating the base rate annually. The General Assembly gave farmers a tax break in '06-'07. Rents, yields and commodity prices are rising. Interest rates are falling.

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