Tax Time Different for Farmers

Tuesday was the infamous Tax Day. A day dreaded by all property owners — Especially farmers.

But some people assert that farmers are reaping the benefits of record land prices. An Indiana Public Media story reports that the base rate for an acre of farmland is projected to reach $2,000 by 2015, compared to the $500 cost/acre from 2000. That’s a 400 percent increase.

According to the same story, however, farm property taxes are expected to increase by more than a third.

It costs more than $400 to produce an acre of corn, so although it seems that a farmer landowner is raking in the dough when commodities are priced well, it doesn’t account for a farmer’s production nor property expenses.

Per an Idaho Statesman story:

“We don’t tax all property the same…Agricultural land gets preferential treatment. Moreover, the mix of residential, commercial and agricultural property varies from one unit of government to another, even within the same county. And the details of this vary from state to state. If farmland prices increase and those of residential and commercial property stagnate or decrease, then farmland will constitute a higher total fraction of the total taxable property in any taxing jurisdiction that has a mix of types.”

One Ohio farmer at an AgWeb blog posted, “Now that farms are more profitable than the bubble-bursted residential market we definitely are taking it on the chin.”

Ohio uses a farm appraisal system called Current Agricultural Use Valuation (CAUV). A Wilmington News Journal story noted the five factors used to calculate CAUV:

  • Yield
  • Crop pattern
  • Crop prices
  • Production costs
  • Capitalization rates

The variables are determined based on an average of the information from the past five to seven years. Every six years, farmland is reappraised and every three years, the formula variables are updated.
In the formula, crop yield, crop pattern (the portion of the land yielding that crop) and crop price are multiplied. The production costs are subtracted and the total is then divided by the capitalization rate.
What caused farm tax increases this year?

  • The capitalization rate decreased because of less costly interest rates
  • Crop prices increased
  • Crop yield averages increased

How have your taxes fared? Do you know of a farmer/farmers struggling to pay their property taxes?


Photo obtained from: indianapublicmedia.org




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