How to keep your Texas ag exemption without farming it yourself

Plenty of Texas landowners have no tractor, no cattle and no time, and still keep their land in agricultural use. The usual way is to lease it to someone who farms or ranches it. Here is how that works and what to watch for.

The rule in one paragraph

Texas appraises qualifying open-space land on its productivity value instead of market value. According to the Texas Comptroller, the land must be currently devoted principally to agricultural use to the degree of intensity generally accepted in the area, and it must have been in agricultural or timber production for at least five of the past seven years. Land inside a city or town has extra requirements. The rule is about how the land is used, not who does the work, which is why a lease to a producer can keep it qualified.

Your options

• Hay lease. A producer cuts and bales your grass. Common on open pasture with good access.
• Grazing lease. A rancher runs livestock. Needs fence and water, or a rancher who will provide them.
• Crop lease. A farmer plants and harvests a crop, usually for cash rent or a share.
• Beekeeping. Qualifies on 5 to 20 acres under the Tax Code. A beekeeper can place and tend the hives. See our beekeeping guide.
• Wildlife management. For land that already has an ag or timber valuation, you can manage for wildlife under a written plan instead. Texas Parks and Wildlife publishes the plan forms and guidelines.

What your appraisal district looks for

Each appraisal district sets its own degree-of-intensity standards for each kind of use: how many animals for the acreage, how many cuttings, how many hives. Your appraisal district sets the specific requirements, so get its current ag guidelines before you sign anything. In general, expect it to care about:

• whether the land is really being used for the agricultural purpose, at the local standard, every year;
• whether that use is the principal use of the land, not a side activity on a homesite;
• the history of ag use on the land (five of the past seven years);
• a filed application. The state form is Comptroller Form 50-129, filed with your county appraisal district, not with the state.

Put the lease in writing

A short written lease protects both sides and gives you something to show the appraisal district. It should cover who the parties are, the land and acreage, the use (hay, grazing, crops, bees), the term and how either side can end it, rent or share, who maintains fence, water and gates, insurance and liability, and what happens in a drought. Have an attorney review it.

Keep records

If the district asks, you want to show the land was actually used. Keep the lease, any rent receipts, hay or sale tickets, head counts or photos of livestock, hive records, and notes of when work was done. If the land changes hands, ask the district what the new owner needs to file.

Don't let it lapse

If the land stops being used for agriculture, or is changed to a non-agricultural use, you can lose the valuation and owe a rollback tax for the previous three years. Read what happens if you lose 1-d-1 valuation.

Sources: Texas Comptroller: Agricultural, Timberland and Wildlife Management Use Special Appraisal; Comptroller Form 50-129; Texas Parks and Wildlife: agricultural land and wildlife management. General information, not tax or legal advice.

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