Ag Tax Exemption in Hays County or surrounding - how it works?

Question

Hello, this is a first post to BP.  My girlfriend and I are planning on moving to Texas to start a business in 2019 due to the overall population and business friendly environment, the lack of state income tax in particular is a plus.  We'd like a 'couple acres' and nice home, but do not want to give away the income tax benefit in property taxes!   So looking for tax exemptions like Agriculture or other to mitigate that exposure.    How do Ag tax exemptions work?  Are there good educational resources on the web for this topic?  I'm sure this is a common question for business people in Texas.   Thanks in advance for the any info!

Jim Cummings · Answer

@Eric Schmalz.

I'm not a expert on Ag Exemption, but generally speaking you need a minimum of 10 Acres (outside your homestead) to Qualify for Ag Exemption. Also, you need to show a profit on the Venture. For instance, you can run goats and sell them to qualify. On the other hand just having a Horse (Hobby) will NOT Qualify for Ag Exempt.

If your buying acreage, make sure you are conversant with "Rollback" Tax provisions, where you could end up paying taxes for last five years, at Non-Ag Exempt Rates.

Daniel J. · Answer

@Eric Schmalz There are several different designations to consider. If you look through the Comptrollers website you can see the differences.

As well, you must continue using the property for that agricultural purpose, ie: if you have an exemption because of cattle you must continue running cattle or something else that qualifies.

As well you need a certain amount of land, the smallest I’ve been able to find is 6 acres, and that’s if you have bees.

Make sure those exemptions will stay in place with what the builders are advertising. As I mentioned most things will go away if not properly utilized.

We do have the homestead exemption which does cap the percentage taxes can be raised, cuts the tax value of the home, and probably one of the most important aspects protects your home from creditors other than basically the claims of mortgage lender.

It can be a great thing, but make sure you are super sure on the details! Also, from what I’ve seen if you are starting from scratch on the ag exemption of whatever form you typically have to show for upward of 5 years that you were fufiling the requirements, so it’s not an overnight thing.

Eric Schmalz · Answer

Thank you Michael!  Residential Property taxes in Hays County seem to be around 2% with the national average around 1% (and lower here in Colorado).  I assume this compensates school funds in particular given the lack of revenue from state income tax.     As I look for subdivision lots to build our residence on, they often refer to lower taxes due to 'Ag exemption' (grandfathered from when it was ranchland?) or 'wildlife exemption' (subdivision set up as wildlife preserve).  Some go on to comment about taxing authority viewing 1 acre with the home on it as homestead and paying very low taxes on the remaining 4 acres (using a 5 acre lot as example).   It's a bit confusing to understand!

Michael Plaks · Answer

Agricultural exemption is not about income tax. If qualified, you're exempted from paying sales tax on purchasing items for the business. Here is the official introduction from the Texas State Comptroller.

And by all means, move here. Great state for business and for lifestyle.