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Reduce Real Estate Taxes Through Farmland Assessment

The New Jersey Farmland Assessment Act of 1964 was enacted by the State Legislature to reduce property taxes for farmland and woodland to encourage property owners to keep land in agricultural or horticultural use, rather than develop it.  To qualify for this reduction in land taxes, the area of land involved must be not less than 5 adjoining acres and the land must be actively devoted to agricultural or horticultural use for at least 2 years prior to the tax year for which the lower valuation is requested.  Gross sales of products from the land must average at least $500 per year for the first 5 acres, with other requirements for any acreage over 5 acres.  Land used for boarding, training or rehabilitation of livestock and for forestlands under a woodlot management program have additional requirements.  If the municipal tax assessor approves the land for farmland assessment, the land will be assessed in accordance with its value for agricultural or horticultural use, and not for its value as developed property.

Under the roll back provision, if the use of the property is changed from agricultural/horticultural to another use, or if the land fails to qualify under the act, the municipal tax assessor will impose an additional tax.  This tax, called a “roll back” tax, is an amount equal to the difference, if any, between the taxes paid or payable on the basis of the farmland assessment and the taxes that would have been paid if the property had been assessed for non-agricultural purposes.  This “roll back” is effective not only for the current year but also for the two immediately preceding tax years.  The two prior years are reassessed and the property bears the full burden of the additional assessment.

The tax assessor for each municipality determines if a property qualifies for farmland assessment for the year.  This determination is based on an application for farmland assessment for the year, which must be completed and returned to the tax assessor’s office by the property owner on or before August 1 of the prior year, e.g., applications filed by August 1, 2008 are to qualify land for farmland assessment in 2009.  The tax assessor’s office will make a determination as to whether the property qualifies for farmland assessment for the year.  If the property no longer qualifies for farmland assessment and if there has been a change in use, roll back taxes will be instituted for the current year and the prior two (2) years.

When purchasing property which is assessed as farmland, a Buyer should confirm that an application for farmland assessment has been submitted and approved.  The Buyer should also be prepared to continue the farming use to take advantage of the reduced taxes resulting from the farmland assessment.  An unaware Buyer who ceases to use the property for farming may find the property subject to significant roll back taxes.

Full post as published by New Jersey Law Blog on August 21, 2008 (boomark / email).