5 Keys Decisions to Make Before Buying a Homestead Property

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irs-shirt1. Tax Status

Buying properties, whether a single family home or a heavily romanticized self-sustaining farm, is an emotional decision for the vast majority of shoppers. The crushing reality of monthly payments, unexpected setbacks, and unforeseen costs can shipwreck your homesteading dream before it even gets out of the harbor, even before setting sail.

It’s for this precisely this reason that we’ve placed real estate taxes at the #1 spot. Most states offer some fairly nice tax advantages, often called an “agricultural evaluation” or “ag exemption,” for properties that meet a certain criteria.

The tax bill on properties with an Ag exemption are often less than 1/10th of what it would be if evaluated as raw land. These tax breaks are, of course, designed to help farmers and ranchers afloat and they do help many folks.

However, many legislatures have setup a pretty rigorous set of rules in order to qualify for this status. In Texas, for example, the minimum timeline for qualifying a piece of property as agricultural is 5 years. That’s from the date of applying for a property that meets the requirements.

If you were to purchase a property that doesn’t qualify, then you’re in for the expenses that come with meeting the requirements, applying, and then proving that you are really using your property for an agricultural endeavor for at least 5 years.

In the meantime, you’re paying the higher tax rate. Gulp.

If you purchase a property that’s already qualified, however, you can simply re-up the agricultural evaluation. That’s just one example in one state. Similar conditions exist in many other states, which is why the research is so crucial.

Unless you’ve got some exceptionally deep pockets, the tax status of a property could be make or break. Don’t let yourself be surprised. Do the research beforehand.

Even if you love the acreage, setting, and location, a property that’s not qualified may send you to the poor house.

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