What Does it Take to Qualify as an Agricultural Property?
Today, we’re seeing more and more properties come on the market that qualify as small farms or ranches. If you’re considering buying a property that has recreational benefits (hunting, fishing, horseback riding), but you’re looking for a way to take advantage of the tax benefits of owning a farm or ranch, you’ll need to understand how each state handles its agricultural classifications.
How can you fully maximize the potential of your land? What can you do with it? How can it benefit you as well as your community? There are many opportunities to turn a recreational property into an agricultural venture without implementing a large-scale operation.
Wyoming Agricultural Properties:
To classify as Agricultural in Wyoming, you must meet all of the following:
1 . The land needs to be utilized in one of the following manners:
a. Cultivation of the soil for production of crops
b. Production of timber products or grasses for grazing
c. Grazing of livestock
2. Not a part of a platted subdivision. However, parcels in a subdivision that are 35+ acres “which otherwise qualify as agricultural land” may be considered for classification.
3. One of the following:
a. Land is not leased and the owner has derived annual gross revenue of $500 or more from the “marketing” of agricultural products from the land.
b. Land is leased and the lessee has derived an annual gross revenue of $1,000 or more from the marketing of agricultural products from the land.
a. The land has experienced an intervening cause of production failure beyond my control.
b. I have caused a marketing delay for economic advantage.
c. The land participates in a bona fide conservation program in which case proof by an affidavit showing qualifications in a previous year shall suffice.
d. A crop has been planted that will not yield an income in the taxable year.
Learn more about agricultural land in Wyoming
Montana Agricultural Properties:
In Montana, parcels over 160 acres automatically get agricultural designation unless the land is used for other purposes. Properties between 20-160 acres must apply for agricultural designation. However, if your parcel is less than 20 acres you still may receive agricultural designation if you apply for and meet the following criteria:
1. Produce and market $1,500 of agricultural product on the property. If the land is leased, the owner can use the amount produced and marketed by the lessee to attain agricultural designation. This product, so long as its amount is documented, can be consumed by people or livestock on the property rather than being sold to an outside consumer.
If your land does not meet the $1,500 requirement, the application may still be granted in these specific cases:
1. The land meets the minimum carrying capacity as determined my Montana State University. They determine the amount of AUMs that equal $1,500 in annual gross income.
2. If the property has experienced some sort of event beyond the owners control such as drought or fire. The owner can also delay the marketing of the commodity due to greater income potential.
Idaho Agricultural Properties:
In Idaho, the land is eligible for agricultural classification so long as it meets one of the following requirements:
1. The area of the land is more than 5 contiguous acres and is used to produce field crops, is in a crop rotation, raises and/or grazes stock for a for-profit venture.
2. The land is 5 or less acres and is being utilized in the manner listed above, AND produces and/or consumes equivalent to 15% or more of the owners or lessee’s annual gross income, OR it produced annual gross revenue of $1,000 in the preceding year.
Land used for the grazing of horses that are primarily used for personal use or pleasure will not qualify.
Oregon Agricultural Properties:
In Oregon if your land is zoned as Exclusive Farm Use you only have to show it is being used “for the primary purpose of obtaining a profit in money” (ORS 308A.056). If your land is otherwise zoned, you’ll have to prove your farm meets certain income levels every 3 out of 5 years. You must show a minimum annual gross income of:
- $650 for 0-6.5 acres
- $100/acre for 6.51 -29.99 acres
- $3000 for 30+ acres
Colorado Agricultural Properties:
In Colorado, land must meet one of the four below requirements:
1. The land must have been utilized for agriculture in the past 2 years as well as the current year or is under Conservation Reserve Management (CRM). “Farm or ranch” property in Colorado is defined as land used to produce agricultural products or graze livestock for the purpose of obtaining a profit.
2. A parcel that has 40 acres of forestland that is being actively managed.
3. A property that has 80+ acres (or less than 80 acres with no residential structures) and is under perpetual conservation easement, was classified as agricultural at the time of the easement, and the easement was granted to a qualified organization.
4. The water on the property is being used for something other than residential use, such as to irrigate or water livestock.
Making Your Property Meet the Agricultural Requirements
Leasing your land may be one of the simplest ways to accomplish this goal. Many properties already have standing contract agreements with neighbors or family members. Get to know the lessee and see if you can work together toward the common goal. Many of the recreational properties we sell have ample room for grazing or irrigated ground for farming.
One of the best options for obtaining agricultural classification is forest management. This is one way to produce a sellable agricultural product, while improving your land quality, wildlife habitat, and decreasing wildfire risk on your property. Talk to a forest management company to come up with a plan to selectively harvest trees from your property. If your land doesn’t fit into the typical profile for a farm or ranch operation, think outside the box! Plant pine trees, grow landscaping shrubs, or harvest your willows for sale to florists.
Equestrian properties are a little different. They can fall into many categories, and it’s important to know that the land you’re looking at can be utilized in the manner in which you’d like. Many of the ranches we sell have horses; they’re “part and parcel” of the ranch business and an integral tool for day to day operations. However, if horses are your hobby, you teach lessons, or they’re your sole business, your new home may fall into a different category. Often there are variances on properties that may allow you to run your horse business as an agricultural property. Getting an agricultural classification for your equestrian property will vary by county and state. Talk to your county assessor’s office and a personal accountant to be sure you’re taking advantage of your property.
If you would like to learn more about ranches for sale with agricultural potential, click here for our list of experienced Ranch Brokers in your state to learn more.