Winter 2016

A Year-End Financial Primer
s the year winds down, you’re probably already thinking
about your New Year’s resolutions. If one of them is to
keep better track of your finances, this is the time to look
back at your records and prepare for tax season or a major
purchase.
Here are five financial tips that can help landowners and potential
land buyers get organized or even save money.
1. MAINTAIN SPECIAL USE VALUATIONS.
In Texas, agricultural land may be appraised based on its agricultural
use rather than its market value. Often called an ag exemption,
such a valuation is actually a different way of appraising the
land’s value.
• An agricultural use valuation, also called a 1-d appraisal,
is reserved for landowners whose primary source of income
is agriculture. The land value is based on the income generated
by agriculture, such as crop or livestock production, and
owners must apply every year.
• An open space valuation, or 1-d-1 appraisal, applies to
more types of landowners and land uses, including wildlife
management. There’s no need to reapply once the property
qualifies, but the county’s chief appraiser may, at his or her
discretion, request a new application.
Matt Ormiston, senior attorney at Farm Credit Bank of Texas in
Austin and a former Farm Credit loan officer, says the end of the
year is a good time for landowners to review their records so that
they avoid losing their special use valuations and possibly paying
rollback taxes.
“Make sure you preserve any special use valuation for property tax
purposes,” Ormiston says. “The increase in property taxes from
losing one can be devastating, making ownership less attractive or,
at worst, unaffordable.”
2. HAVE A COMMERCIAL ACTIVITY ON YOUR LAND.
In addition to reducing property taxes, using land for agriculture
offers federal income tax benefits.
For the greatest savings, talk to a CPA before a land purchase, and
get an appraisal of assets such as barns, houses, fences and stock
tanks. The cost of the land isn’t deductible, but the cost of an asset
is, provided there’s a commercial enterprise.
“Assuming you’re buying the property for some kind of agricultural
activity — it can be cattle, hay-raising, commercial hunting
or whatever the case is — a lot of things can be either deducted
currently or depreciated as an asset going forward,” says Wayne
Bawcum, a certified public accountant in Sulphur Springs, Texas.