Are there farmland tax breaks in Pennsylvania?

Every week, Mansion Global poses a tax question to real estate tax lawyers. Here is this week’s question.

Q. What are the farm property tax incentives in Pennsylvania?

A. Pennsylvania has a strong farmland preservation program — more than 11 million acres of state farmland is enrolled in its Clean & Green program, which helps keep property taxes affordable.

The program, established in 1974, assesses “farm and forest land based on its use value rather than fair market value,” according to Pennsylvania Secretary of Agriculture Russell Redding.

“Ensuring that taxes are not a barrier for farmers and forest owners is a key part of our efforts to protect our waters, lands and forests and preserve our farms and food for future generations,” said he said in a November statement.

Farms – or other land used for agricultural purposes, including forest reserves – must be at least 10 acres in size or generate at least $2,000 in farm income per year to qualify for preferential tax treatment, according to the law. ‘State.

The Pennsylvania Department of Agriculture provides county assessment offices with use values ​​each year, which are determined based on the potential income a parcel of land could produce “when best used for l ‘agriculture’, according to the state.

The value of farmland assessment is generally lower than it would be if the land were assessed at fair market value, the state said. Property tax bills are based on specially assessed land, reducing liability for farm owners.

However, if a landowner wishes to change the use of their land, they will be “subject to seven years of sliding scale taxes at 6% interest per annum”, according to the agreement. A restoration tax is a tax issued when a parcel of land changes use, and the landowner will be subject to the amount of tax due on the highest value accessible land.

Landowners can “separate” 2 acres per year – up to 10 acres – to bequeath to family or make way for a residence, although abatement taxes are payable on these acres. If a landowner separates a large parcel of land into two parcels of at least 10 acres and still used as agricultural land, he will not be subject to the dismantling taxes.

There is also a separate tax credit for “starting farmers” who own or rent their land. The credit is equal to “5% of the lesser of the sale price or the fair market value of the agricultural asset, up to a maximum of $32,000; or 10% of gross rental income in the first, second, and third year of the lease, to a maximum of $7,000 per year,” depending on the state.

There are several criteria for qualifying as a beginning farmer, including not having received income from agricultural production for more than 10 years.

Pennsylvania provides up to $6 million in annual tax credits to new farmers each year, depending on the state.

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Amalia H. Mercado