Ohio uses a rather complex formula to calculate property taxes for farmland. Instead of paying a percentage of the presumed value of the land, as is the case for most residential homeowners, farmer’s property tax is calculated on the current use of the land.
The formula of the Current Agricultural Use Value (CAUV) typically results in lower property tax rates for farmers. This method of valuation was designed to prevent farmland from being subjected to rapidly rising land values that would drive farmers off their land as suburban sprawl engulfs their farms.
Due to sharp increases in farm commodities during the last decade or so, property taxes on farmers increased 307 percent. While farm product prices increased 100 percent during that period, they did not come close to making up for that 300 percent increase.
The legislature is considering a bill that would lower the property taxes for farmers by about 25 percent. But, as many taxpayers recognize, when one tax goes down, another tax goes up. This has caused concerns for other interests, such as school districts. The funding formula for many districts would mean if farm property tax is reduced, residential taxes would need to increase to keep the proper levy amount stable for the district.
Some legislators seemed skeptical of making any changes and it is unclear if there will be any further changes. This issue highlights the need for farmers, who face potentially volatile swings in their property tax, should engage in carefully planning their tax for future years. This could help minimize the cash flow imbalances with their tax payments.
Source: dispatch.com, “Cutting Ohio farmers’ property taxes could cost homeowners, schools millions,” Jim Siegel, May 4, 2016