What Defines Agricultural Land?

There was an interesting article in today’s Indy Star for those interested in tax policy: Tax bills shock Hoosiers whose farmland is reclassified.

The gist is that agricultural land in Indiana is assessed at a much lower value than residential land. However, what exactly determines whether land is classified as agricultural apparently leaves a lot of discretion to the county assessor. By law, land should only be assessed as agricultural land if it is used for agricultural purposes. But it isn’t always obvious what constitutes agricultural purposes. As some counties change the standards for what constitutes agricultural purposes — or, from another perspective simply correct past errors in classification, some rural property owners have seen big increases in their assessed value, and therefore their property tax bills.

The property tax circuit breakers (tax caps) make matters even more complicated. While land classified as residential is assessed at a higher rate than agricultural land, the homestead (owner-occupied residential) tax cap is at 1% of the assessed value. While agricultural land is assessed at a lower value, the tax cap is at 2% of assessed value. So the actual property taxes paid by the owner will depend on whether or not their property is already at the tax caps.

Our own County Assessor and president of the Indiana County Assessors Association, Judy Sharp, is quoted extensively in the article describing the difficulty in determining what constitutes agricultural use. She is also quoted in support of legislation that Representative Bob Cherry (R-Greenfield) says he intends to introduce this session that would specify that for land whose use doesn’t change, the classification for property tax purposes can’t change either. However, this legislation may, despite protecting taxpayers from increases in property taxes due to corrections in classification, also make it very difficult to correct past errors and county-by-county inequities in classification of agricultural land.

Leave a Reply