Farmers are beginning to pay less in property taxes as part of changes made to the way farmland property values are calculated in Indiana, but the drop isn’t likely to have a large impact on homeowners, businesses and local governments in Johnson County.
The Indiana Legislature approved changes to how farmland property taxes are collected last year, with 2017 being the first year farmers are paying taxes at the new rate.
The problem lawmakers attempted to address was that the amount of money farmers were paying each year in property taxes was growing at a time when the amount of income they were getting from their crops was decreasing, said Larry DeBoer, a Purdue University professor and property tax expert.
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The base rate for an acre of farmland was $2,050 for taxes paid in 2016; that dropped to $1,960 this year and is expected to fall to about $1,600 by 2019 and continue to drop for several more years, he said.
Those figures used to be determined by assessment data that was four years old. Now it is based on two-year-old data, DeBoer said.
Katrina Hall, the director of public policy for the Indiana Farm Bureau, described the changes as successful in providing much-needed relief to farmers, who have been experiencing significant revenue decreases.
The new calculation also means that property taxes for farmers will adjust comparatively with other properties going forward, she said.
The problem with the former system was that it was taxing farmers using assessments that were based on high commodity prices at the same time prices were dropping dramatically, DeBoer said.
In some counties, farmland can account for as much as half of the tax base, and any changes to it will have a significant impact on the taxes paid by other property owners, including homeowners and businesses, and could impact the amount of money collected by local governments, DeBoer said.
That isn’t the case for Johnson County. While farmland is valued at about $330 million, that is just a fraction of the $6.7 billion of taxable property, he said.
Another nearby county will see a more noticeable change from the decreasing farmland property taxes.
Shelby County has about the same amount of farmland, valued at $337 million for taxes, but has a total tax base of $1.8 billion. Because farmland is 19 percent of the total assessed value in the county, any large changes to farmland taxes will be noticeable to other property owners when their own taxes rise.
The final taxes owed on farmland are determined by the base rate, which is adjusted according to the quality of the soil and other contributing factors, such as how often the land floods, DeBoer said.
One area of concern for farmers is still how the final assessments are determined, Hall said.
She said there needs to be more consistency in looking at the factors that lower the value of the property.
With three different systems having been used to calculated farm property values in the past three years, DeBoer expects that the legislature will stick with the current system. No major changes were made this past legislative session.
“I think we are probably going to live with this version for a while and see what happens,” he said.
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The calculation used to determine how much property tax is owned on an acre of farmland has changed several times in the past few years. Here is a look at the past and projected base rates for the value farmland per acre:
2006: $880
2016: $2,050
2017: $1,960
2018: $1,850
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