Do you want to turn your home into a farm to lower your property taxes? Do you already have a farm, ranch, nursery, or other agricultural activity on your property? Here’s what you should know about Florida’s property tax rules.
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What is the agricultural exemption?
There’s technically no agricultural exemption. Most people are thinking about the agricultural classification, which is also commonly referred to as greenbelt or the greenbelt exemption.
An exemption excludes part of your property’s value from property taxes. For example, the Homestead Exemption gives most homeowners a $50,000 exclusion.
A classification is a different set of tax rules. In Florida, the agricultural classification means a property will generally be assessed at a lower value than if it wasn’t an agricultural property.
The purpose of this classification is to protect farmers from property tax increases due to development around their farms. It also provides an incentive to the state’s agricultural industry.
Valuing Agricultural Properties vs. Other Properties for Tax Purposes
For Florida property taxes, property taxes are usually based on the market value of the property. This is usually what a buyer would pay for the property on the open market and can also consider things like the possible uses of the property or how much income it produces.
For agricultural properties, the value of the property is only based on agricultural use. This includes what a buyer would pay for the property to use for agricultural purposes (but not other developments), the agricultural income the property produces, or other related factors.
The agricultural value of the property will generally be much smaller than the open market value of the property.
Can anyone claim the agricultural classification?
Technically, anyone can claim the agricultural classification. However, you need to be using your property for bona fide agricultural purposes.
It’s not enough to have a chicken or a cow. “Bona fide agricultural purposes” means good faith commercial agricultural use of the land. See Florida statute 193.461.
Under the law, the following factors determine bona fide agricultural purposes.
- The length of time the land has been so used
- Whether the use has been continuous
- The purchase price paid
- Whether the amount of land is suitable for the stated agricultural purpose
- Whether an indicated effort has been made to care sufficiently and adequately for the land in accordance with accepted commercial agricultural practices, including, without limitation, fertilizing, liming, tilling, mowing, reforesting, and other accepted agricultural practices
- Whether the land is under lease and, if so, the effective length, terms, and conditions of the lease
- Such other factors as may become applicable
Additionally, commercial agricultural use means for-profit. Farming for personal use or as a hobby does not qualify.
Can you lease your property for agricultural use?
It’s common for property owners to lease their property to a farmer to qualify for agricultural classification. This is generally a legitimate move as long as you lease to an actual agricultural business (including small farmers) not related to you.
You should have a lease covering the use of the land, start and end dates, and other terms. Your property appraiser may also request additional documentation such as the tenant’s tax returns showing farming income or proof of their registration as an agricultural business.
A lease generally needs to be in effect as of January 1st, since it’s your land use as of that date that determines your property taxes.
How do you apply for agricultural classification?
You must apply for agricultural classification through your local property appraiser. You will generally need to submit Florida Department of Revenue Form DR-482 and other supporting documentation.
The purpose of the application is to show that you’re using your property for bona fide agricultural purposes. Property appraisers are aware of people trying to use the agricultural classification as a loophole and will generally closely examine each application.
The deadline to file your application is generally March 1st each year.
Can you apply online?
Each county has its own process. When online applications aren’t available, you may need to mail your documents or apply in person.
Is it possible to get pre-approval for your proposed agricultural use?
If you’re starting a farm to save on property taxes, you may want to ask the property appraiser something along the lines of, “If I get 12 goats, will I get the agricultural classification?”
Property appraisers generally won’t pre-approve a proposed use. They’ll generally only look at your actual current use.
You can get an idea of the likelihood that you’ll be approved by researching the law, past decisions by your property appraiser, or court cases. You may also want to talk to a lawyer who specializes in agricultural classification.
Do you have to renew your agricultural classification once approved?
It’s common for your property appraiser to regularly request supporting documentation similar to what you provided when you applied. You must supply this information, or you may lose your agricultural classification or have it reduced.
You should also contact your property appraiser immediately if you change how you use your land.
What happens if you’re buying land with an existing agricultural classification?
If you buy agricultural land, you must make a new application for the agricultural classification. The classification doesn’t automatically stay with the property when there is a new owner.
The property appraiser will consider evidence that you intend to use the land the same way. This may include that you’ve purchased the existing agricultural operation along with the land, that you have your own existing agricultural operation, or that you’ve taken active steps to start one.
Does the agricultural classification apply to your entire property?
The agricultural classification generally won’t apply to your entire property. If you maintain a home on the property, it will only cover the land you use for agricultural purposes and not the portion of your property used for a home.
Even if you use the property 100% for agricultural purposes (e.g., a farm you don’t live on), the agricultural classification typically won’t apply to the entire property. It generally covers land only and not improvements like barns or stables.
Can you change how you use your property?
You can change how you use your property, but you generally need to provide updated information to the property appraiser’s office.
For example, if you build a new home or expand your home on land you had classified as agricultural, that part of the land will lose the classification. Your remaining land can generally keep the classification as long as your use still qualifies. One thing to watch out for when reducing the size of your agricultural land is that it could become too small to be considered commercially viable.
If you expand your agricultural use, you can also have additional land classified as agricultural. You would need to apply and show you meet the requirements for the additional land.
Can you claim the homestead exemption and agricultural classification?
You can’t claim the Homestead Exemption and agricultural classification on the same land for tax purposes. You can claim each on separate parts of the same property.
For example, you have a ten-acre property. You can receive the agricultural classification on nine acres and the Homestead Exemption on the remaining acre if you meet the usual requirements for each.
Does Homestead Exemption or agricultural classification save you more on taxes?
If you’re buying a large property, there is no clear answer on whether you should try for the agricultural classification or request the Homestead exemption on your entire property. There are several factors you should consider.
The intial taxes on agricultural property will usually be lower than on residential property. This is usually why people try to get the greenbelt exemption.
One thing to watch out for here is if you’re selling an existing Florida homestead. If you’re eligible for homestead portability, you may want to make sure that your new homestead is large enough to transfer your full benefit.
Removing or Losing the Greenbelt Exemption
If you decide to no longer use your property for agricultural purposes or your activities no longer qualify as a bona fide commercial agricultural use, there is an important tax consequence to be aware of. That portion of the property will be reassessed at its current full market value.
Homestead protections, such as the limit on assessed value increases under Save Our Homes, don’t apply to agriculturally classified land.
Example: You buy a $100,000 property and use it 90% for agricultural purposes. Over time, the full market value increases to $1,000,000. Assume that with Save Our Homes, the assessed value of the full property would have been capped at $250,000.
However, Save Our Homes doesn’t apply to the agricultural portion. When you lose the agricultural classification, that portion gets assessed at 90% x $1 million = $900,000. The 10% you had homesteaded would be 10% x $250,000 = $25,000. So you’re looking at an assessed value of $925,000 instead of $250,000.
These numbers are made up, and it will depend on how fast property values rise and how long you hold a property, but the risk is clear. If you go for the agricultural classification and decide to change how you use your land or can’t keep a commercial operation going, you could end up with a much higher property tax bill than you would have had.
Increasing Property Values
Another thing to watch out for is long-term increases in property values. Under Save Our Homes, the assessed value of a homesteaded property can’t increase by more than 3% per year. If the consumer price index is lower than 3%, it can’t increase by more than the consumer price index.
There is no limit on increases in the assessed value of an agricultural property. It could be 4%, 5%, 6%, 10%, or however much property values increase. Over time, these increases could cause your property taxes for agricultural property to exceed what they would have been if your entire property had been homesteaded with the Save Our Homes benefit.
How do zoning and other land use requirements impact the agricultural classification?
Having land where agricultural use is permitted is not enough to qualify for the agricultural classification. You must actually be using the land for bona fide agricultural purposes.
Zoning or other restrictions may prevent you from receiving the agricultural classification. The agricultural classification doesn’t create a right to use any land for agricultural purposes. It provides a tax benefit for using your land for agricultural purposes where allowed by law.
If you do have the agricultural classification, it does not automatically exempt you from zoning, building permits, or similar legal requirements. Your local law may (or may not) have different sets of requirements or exemptions for agricultural property.
What uses count as good faith commercial agricultural use?
The following are examples of agricultural purposes that commonly qualify for the agricultural classification. These are summaries and examples only.
Florida statute 193.461 sets a broad subjective standard. Each county may interpret the statute slightly differently.
Other factors may affect your application. For example, if you try to follow standard minimum guidelines on a very large property, you may not be able to receive the agricultural classification on your entire property.
If you are leasing your property, you will generally need to provide proof of the lease along with proof that your tenant’s agricultural business meets the requirements for good faith commercial agricultural use.
- Current registration with the Florida Department of Agriculture
- Proof of related income such as honey sales, queen or bee sales, or pollination contracts
- Use the property for a significant portion of the year (6 months or more)
- Have a minimum of 24 hives per acre or 24 hives for a smaller parcel
- Typical farms are a minimum of one to five acres in size
- Grown in-ground or in containers filled with peat/pine bark combination
- Follow the March and April harvest
- Minimum of five cows and one cow per three acres on large properties
- Proof of purchase of the cattle
- Proof of commercial operation (not enough to just have cows on the property)
- Coops or free-range chickens generally won’t qualify
- Commercial poultry and egg farms must follow extensive licensing requirements
- Trees set or in process by January 1st
- Evidence of proper care and management of the grove
- Harvest the grove when producing
- Expectation of profit
- Typically refers to vegetables
- Follow management practices and growing seasons for the crop grown
- Minimum herd size of 12
- Scrapie identification number for each animal
- Minimum two cuts per year
- Show variety of hay sold, number of rolls per harvest, and price per roll
- Minimum of five horses and one horse per acre
- Commercial lease agreement with an unrelated party
- Tax return showing boarding income
- Minimum of three brood mares
- Each mare brooding at least every other year
- Proof of registration for each horse, breeding contacts, and marketing information
- Certificate of registration with the Florida Department of Agriculture
- Bona fide commercial irrigation system (irrigation by hose generally doesn’t qualify)
- Classification only applies to the portion of land used for growing plants and necessary service areas
- Landscape service businesses are not an agricultural use
- For mature plants, must show evidence of an attempt to make a profit and the marketability of trees or plants of that age or older
- Regular care and maintenance of the land, such as fertilizing, liming, tilling, or mowing
- Presence of cattle or signs of cattle on the property
- Regular care and management such as fertilization, weed control, mowing, and irrigation
- Actively sell sod (not a loophole for open fields of grass)
- Follow typical industry management practices
- Follow the usual planting and picking seasons
- Follow forestry management plan from a qualified forester
- proper management such as periodic thinning, weed control, and fire line perimeters
Other uses are on a case-by-case basis. You will generally need to show both the agricultural use and an intent to profit.
Agricultural Classification Denials
Once you apply for your agricultural classification, the property appraiser’s office will respond by July 1st. If you get an agricultural classification denial letter, it’s not the end of the road.
Why are agricultural classifications denied?
There are several reasons the property appraiser may deny your application.
You must file your application by March 1st of the tax year for which you’re seeking the agricultural classification. This is generally a hard deadline.
Your property appraiser may still approve your application if you can show particular extenuating circumstances that caused you to be late. Generally, the worst thing that can happen if you file late is that you lose your classification for that year, so it generally won’t hurt to try to apply with an explanation.
Lack of Documentation
Your property appraiser will often request specific documentation of your agricultural use. Examples were covered above.
The property appraiser may ask you for additional information before denying your application or deny your application and require you to appeal.
If you simply omitted the documentation, providing it will often be enough as long as it shows you meet the requirements. If you can’t provide the specific documentation requested, you may be able to explain why and provide alternative proof.
If you lease land, it may be common for someone who isn’t familiar with the application process to not want to give you tax returns or other financial information. You should make them aware of the requirements before signing a lease and may want to include in your lease that they must provide you with any documentation needed for property taxes.
Not Using the Land Primarily for Bona Fide Agricultural Use
In some cases, the property appraiser may determine that you’re not using the land primarily for bona fide agricultural use even if you completely fill out the forms and supporting information.
Common reasons include the size of your property, the property not being maintained, or the operation not being commercially viable. Unimproved or overgrown vacant land is a frequent cause for denials.
If you were denied for this reason, you should consider whether
- There is additional information you can provide
- There are legal reasons your application should have been approved as-is
- You can make changes to receive the classification next year even if you don’t think you can appeal this year
How can you appeal a denial of the agricultural classification?
The first step is cooperating with your local property appraiser’s office. They may request additional information before issuing a formal denial. They may also have an informal process for you to request reconsideration.
Keep in mind that the property appraiser can generally set administrative requirements to apply. For example, they can typically require tax returns even though tax returns aren’t specifically required by Florida statute, because tax returns show commercial use of the land.
If you believe they’re setting unreasonable requirements or going beyond Florida law, you do have the right to appeal. However, it may be easier to just give them the information they want if possible.
Value Adjustment Board
The value adjustment board is a special body in each county specifically created to hear appeals of decisions by the property appraiser. It includes members of the county commission, school board, and local citizens. Some areas have you appeal to a magistrate judge who makes recommendations to the full value adjustment board.
You must send a petition to appeal to the value adjustment board within 30 days of receiving your denial letter from the property appraiser. In most counties, this is done through the Clerk of Court’s office.
You can also file a lawsuit in circuit court either to appeal a decision by the value adjustment board or directly after receiving the property appraiser’s decision. A circuit court judge will hear your appeal.
This option is often more costly and time-consuming than going through the value adjustment board.
You typically have 60 days to appeal from either receiving the value adjustment board decision (if appealing their decision) or when the property appraiser certifies the tax roll (if you didn’t go through the value adjustment board).
Do you need a lawyer to appeal?
You’re not required to use a lawyer to appeal, but you should consider if you need one.
For appeals that are mostly a matter of providing missing paperwork or giving more information, you may be able to appeal on your own. If the property appraiser’s office accepts the facts you provided but denies you for not qualifying under the law, you may want to hire a lawyer to make the needed legal arguments.
Of course, you may also want to consider the cost of your appeal versus the potential tax benefit. You may not want to spend thousands of dollars in legal fees to save hundreds of dollars in taxes.
Does getting denied mean you can’t receive the classification in future years?
No, there is no waiting period or other restrictions if your application is denied. You can apply again next year.
Of course, there is a good chance of getting denied again if you don’t make any changes.