What Are Rollback Taxes?

Hay Fields in Texas and Rollback Taxes

I recently sold a property out in the country. The home sits on about seven acres and six of them have an agricultural exemption meaning the owner is using the land to produce a crop and the county does not tax the land used for crop production. This saves the owner about a thousand dollars in taxes each year in property taxes.

When the land is sold, the new owner may continue to produce the crop and claim the agricultural exemption. If they decide not to do so, the county will assess a rollback tax. The county will go back and calculate what the taxes would have been without the exemption for the past three years and the new owner will pay the amount due.  While in this case the cost will only be about $3000, the costs could be substantial for larger parcels or land that has a particularly high value due to its location.

Note that the amount of time covered in the rollback period varies from place to place. I was talking to a gentleman from Washington and he told me they go back seven years where he is currently living.

If you are purchasing property with some kind of exemption and you decide that you are not going to continue that exemption, you can negotiate who will pay the rollback taxes as part of the purchase contract.

Tom Branch, Broker, CDPE, SFR

Photo – Copyright 2011 Imaged2Sell

About Tom Branch

Tom Branch has written 597 posts in this blog.

Have you ever just met someone, but felt you like you'd known him for years? That's what most people experience with Tom. He has a knack for making folks feel right at home. After 21 years in the Air Force, loyalty and honesty are the foundation of everything Tom does. In addition to being a Texas Real Estate Broker, Tom is a Certified Distressed Property Expert (CDPE) and a Short Sales & Foreclosure Resource (SFR).