In New Jersey, farm properties may be assessed for taxes differently than residential properties.
New Jersey, like most American states, finances its government through ad valorem -- value-based -- taxes on real estate property. Both owners of farmland and residential properties are subject to the property tax. Understanding the tax laws in New Jersey and how they differ between residential and agricultural land is important for developers, residents and farmers.
Property Tax Basics
In New Jersey, property taxes are levied on privately owned property according to their taxable assessed value, which is determined by the local assessor. New Jersey tax laws require the local assessor to determine the valuation for both farmland and residential properties before Oct. 1 of the tax year. Under the law, the valuation is based on the property's "true value," as determined by qualified appraisal and not necessarily its value in a recent sale.
Zoning and Property Uses
The determination whether a property is farmland or residential has implications in tax law, and is originally based in the state zoning legislation and the Right-to-Farm Act. Under the zoning law, local governments are empowered to zone land for agricultural uses and prohibit further development on these properties. Under the Right-to-Farm Act, farm uses are protected from nuisance lawsuits for the activities of cultivating and harvesting agricultural goods. To be eligible for this production, a farm operation must produce at least $2,500 annually of agricultural goods and be at least five acres in size. Those smaller than five acres may apply if their agricultural production exceeds $50,000 per year.
Farmland Tax Assessment
While residential properties in New Jersey are assessed for taxation at their normal true value, the New Jersey Farmland Assessment Act "permits farmland and woodland actively devoted to an agricultural or horticultural use to be assessed at its productivity value," according to the state Department of Agriculture. This agricultural tax assessment has the effect of lowering the taxes for most properties and is designed to help protect and preserve the economic viability of farming operations in the state.
Homestead Benefits for Residences
While residential properties are not eligible for property tax assessment reductions under the Farmland Assessment Act, they can receive property tax deductions on their primary residence using the Homestead Benefit. Under New Jersey tax law, senior or disabled homeowners making less than $150,000 and nonsenior homeowners making less than $75,000 may claim a deduction on property taxes that they paid only on their primary residence. Farm owners who live on their farm property may also claim the Homestead Benefit. This deduction is refunded to them in the form of a property tax credit. The credit is nonrefundable -- homeowners cannot receive a Homestead Benefit in excess of the property taxes they actually paid.
