Farmland Tax Values Down, Predicted To Go Lower

According to a recent study by the Ohio State University (OSU), taxes, on average, are going down for owners of farmland across Ohio and are expected to decline at an even faster rate beginning in 2020. The study shows tax valuations have dropped by one third since the Current Agricultural Use Value formula was changed by the state legislature in 2017.
Before the formula change, the average tax valuation of land in Ohio was $1,310 per acre. After the change, the average valuation was $875 per acre, according to the study done by agricultural economists Robert Dinterman and Ani Katchova with OSU’s College of Food, Agricultural, and Environmental Sciences.
“Farmers, I would think, would be pretty pleased to see their taxes going down,” Dinterman said.
In 2016, before the change was in place, the average value of agricultural land in the state was $1,310 per acre, according to the results of the study by Dinterman and Katchova. This year, the value decreased to $875 per acre.
“Agricultural land values and the corresponding taxes paid on that land will continue to decline at an even faster rate,” said Dinterman. “Steeper decreases in taxes will be seen, on average, because the changes to the way the farmland is assessed have been phased in between 2017 and 2019. Small changes were made each year to avoid a sudden and dramatic drop in tax revenue.”
According to the study, in 2020, the phase-in will end, so Ohio farmland owners should see another one-third drop in the assessed value of their land, compared to the previous year, and similar declines in their taxes.
The value of farmland in Ohio is determined based on a number of factors including the yields and crop income that land generates. The declines are due in part to drops in the price of corn and soybeans; the two major crops grown in Ohio.
“I think farmers would almost certainly trade having a higher tax bill for higher revenues right now,” said Katchova, associate professor and chair of the farm income enhancement program in the Department of Agricultural, Environmental, and Development Economics in CFAES.
When taxes go up on farmland, owners of that land pass on part of that burden by raising the rent for tenants using that farmland, Katchova said. For every dollar of property taxes a landowner pays, 30 to 40 cents of that are passed to the tenant in the form of higher rent, she said, citing the results of a different recent study that she and Dinterman did.
Even though taxes on agricultural land are going down, that likely won’t trigger a decline in rates on renting that land, Katchova said.
“Rent doesn’t usually go down nearly as much as it goes up,” she said.
With the decrease in taxes, county governments will see a decrease in funding as property taxes make up parts of general funds for operations. The County of Adams received a boost in property taxes three years ago as property values increased. The county will now have to prepare for a slight revenue decreases.