Farmland Tax Treatment

State agricultural valuation lowers property tax, and the section 1062 election can spread tax on a farmland sale.

IRS scrutiny

Generally accepted, with some areas where the IRS looks closely.

Rules, risks and sources

Key rules

Texas 1-d-1: land devoted to ag/timber production at least 5 of the past 7 years (extra criteria inside city limits); Form 50-129 application; change of use triggers rollback tax for the prior 3 years. Florida §193.461: return/application by March 1 each year; 'good faith commercial agricultural use'; county may waive annual reapplication. From the 2027 tax roll, Florida's definition of agricultural purposes also covers compost derived entirely from agricultural activity (ch. 2026-239). §1062 (tax years beginning after July 4, 2025): qualified farmland used/leased for farming substantially all of prior 10 years; buyer is a qualified farmer; 10-year farming-use covenant; proposed regs published Sept. 29, 2026.

Primary sources

Facts checked 2026-10-20.

Common questions

How does land qualify for Texas agricultural (1-d-1) appraisal?

The land must have been devoted to agricultural or timber production for at least five of the past seven years, and the owner applies to the appraisal district. A later change of use triggers a rollback tax for the prior three years.

Source: Texas Comptroller, Agricultural and timber special appraisal

What is the farmland sale installment election?

For sales in tax years beginning after July 4, 2025, a seller of qualified farmland to a qualified farmer can elect to pay the tax attributable to the gain in four equal annual installments. The land must have been used or leased for farming during substantially all of the 10 years before the sale, and must be restricted to farming use for 10 years after it.

Source: 26 U.S.C. §1062