How do you become a legal farm?

[InHisName]

We have an 8 acre homestead with animals, garden, etc. and also have a business in which we sell homestead items from our place. It just occurred to me from reading another thread that we may be able to be classified as a "farm", and save some on our property taxes. Where do I start looking? Local tax guy? State laws? Can someone point me in the right direction?

[jassytoo]

Go to the county court house and talk to the county assessor. It used to be Rachael Syracuse but I don't know if it still is. When we got our place near you anything under 40 acres you had to make so much per acre. The less acreage the more $ per acre. Because ours is a larger piece we just have to show a profit.

[InHisName]

Thanks, Jassy. Talked to Rachel, it was as you said, so much per acre profit, with 3 out of 5 years recorded.

[jacqueg]

Be careful with this, in some states, if you get your land in a farm classification, get the tax break, and later remove it from farm classification, you can owe back taxes. If this is a concern for you, check it out thoroughly.

[highlands]

Well, let's eliminate one possibility: Don't grow MaryJane. Growing illegal substances would inhibit the ability to be a legal farm.

Around here being a "Legal Farm" isn't a big issue. No zoning. Everything is pretty much farming or forestry aside from the few bedroom houses for the local urban areas (their population <10K, our pop <1K). When you get to the end of the year you use 1040 sch-F on your federal tax form to declare your income and expenses.

If you want to get a little more complicated you can incorporate. Some people do. Not all.

As to saving on your property taxes, generally you must earn >50% of your total household income from your farm. Otherwise it is considered hobby or the like. You may also need to have a plan (e.g., Current Use Plan in Vermont) and the state may take a lien (10% here) against your property. Some banks won't deal with you if there is the lien on your land so be careful of what you ask for. We do forestry, farming and earn almost all of our income from our farming. Doing the plan is a lot of work. If you hire a forester to do it then it costs a lot of money.

Frankly, the whole real estate taxes issue is a ruse. It is a way that the city people steal money from their country neighbors. Land does not put a burden on the town. It is the homes, the drivers, the people who burden the towns with taxes. It is the home owners who should be paying virtually all of the taxes. The whole thing is bass akwards. Unfortunately it won't get better because the urbanites outnumber the rural folk and will keep jacking up our taxes because they have democratic control to abuse us.

[jassytoo]

Originally Posted by jacqueg

Be careful with this, in some states, if you get your land in a farm classification, get the tax break, and later remove it from farm classification, you can owe back taxes. If this is a concern for you, check it out thoroughly.

I think that's true where you are too, InHisName. Something to think about.

[Txrider]

Read your state property tax code laws, then read your county tax law code.

Don't count on the assessor to tell you everything.

Here in Texas there are three different agricultural property tax exemption classes.

Basically if you use it for primarily agricultural use, based on normal stocking rates or planting rates it qualifies if done for a certain time period. Less time if it is your primary income.

But there is another exemption for "wildlife management" that both allows you to use the land for agriculture under certain guidelines, but does not require it, as long as you maintain specific practices to maintain wildlife. Even easier to get if you live in a federally protected species habitat.

Each county imposes there own qualifications where the state law gives flexibility in executing the law, but the state law is the law.

[MN Gardener]

Check you county's website and see if the have any information that might help you. If not, check with the state agency that oversees the assessing in your state (in MN it is the Dept of Revenue). If you can't get the information you need call you county assessor's office. Every state has different rules. In MN you have to have a minimum of 10 acres, I am not sure what WA requires.

[sammyd]

For federal taxes you must earn 1000 dollars from your farm. There is no limit on how many years you must make a profit, but you should once in a while.

States have different rules for breaks on land taxes.

[BillHoo]

In NJ, you have to have a min of 5 acres and sell $500 worth of goods to get the tax break as a farm. I know a guy I worked with in NYC who was a video editor who had a 5 acre home in NJ. He had bees on the property and made 2 quarts of honey a year. He sold each for $250 to his relatives. He paid the sales tax on the product too. Something like $20. Got several thousand in tax breaks.

[Common Tator]

You might want to register your place as a farm with the USDA, Farm Service Agency. We did, and were able to insure our apple crop with them. We're very glad we did! We had a bad snow storm in late May while we were in full bloom, and lost this year's crop!

[RedneckPete]

Here, we need to show a minimum of $7000 a year in farm income. We have to be able to prove it, which means no cash sales. It has huge implications for our property tax, cuts it in half.

Pete

[fantasymaker]

Here you just farm it.

[Wisconsin Ann]

As others have said....it's very state oriented. There are some federal things that you can use, but for the most part, it's up to your state. If you're looking for the sales tax exemption, for instance, here in Wisconsin, I can just set up with each vendor and say "i'm a farm" and fill out paperwork. At the end of the year, I'll get a statement from each vendor saying how much I've spent, not paid in sales tax, and then I have to add that into my income tax paperwork. (farms are a LOT of paperwork now)

Some of the things you get for being a "home" you don't get for being a farm..or rather, like insurance, you have to get "special" policies for. check out EVERYTHING that you normally take for granted, btw. You just never know what isn't covered.