Farm Residence Exemption

Definitions


1. Farmer is an individual who normally devotes the major portion of the individual’s time to the activities of producing unmanufactured products of the soil, poultry, livestock or dairy products. The farmer and spouse, if married, must have received more than fifty percent of the their combined annual net income from farming activities in any one of the three preceding calendar years, whether one or both are farmers. The term “farmer” includes a retired farmer, a beginning farmer or a surviving spouse of a farmer.


2. Retired farmer is an individual who quit farming because of illness or age. It does not include an individual who quit farming to change occupations.


3. Net income from farming activities is income from producing products of the soil or raising farm animals. It is the taxable farm income for income tax purposes (including CRP payments), minus income from custom work, plus taxable capital gains from the sale of agricultural products, plus the basis deducted in calculating capital gains, plus depreciation expense from farming activities, plus interest expense incurred in the farming operation. Interest expense includes such items as mortgages on the farm land, buildings, equipment, etc. It does not include income from cash rent; mineral leases or royalties; wages or salaries; interest income from a contract for deed payment from sale of farm land; interest, the principal of which may have been derived from farm income; or any other income not specifically defined as farm income for income tax purposes.

General Provisions


4. A residence located on a tract of agricultural land containing 10 acres or more, occupied by a farmer who also farms other noncontiguous land, qualifies for the exemption even though the particular tract of land upon which the residence is located does not produce 50 percent or more of the farmer’s net income.


5. A residence located on a tract or contiguous tracts of agricultural land, whether owned or rented, containing less than 10 acres is not exempt.


6. A residence located on agricultural land in unplatted areas within the boundaries of an incorporated city may be exempt provided the building is used as a farm residence or is part of a farm plant.


7. A residence located on platted land within the boundaries of an incorporated city or upon railroad operating property is not exempt.


8. A vacant farm residence or building located on agricultural land is exempt provided it was exempt as part of a farm plant or as a farm residence when it was last used. A vacant farm residence which was taxable because of a non-qualifying use is taxable until its active use is changed.


9. A residence located on agricultural land used by a farmer to provide housing for that farmer’s workers is exempt provided it is used as part of a farm plant.


10. A residence situated on a farm and occupied by a farmer is not exempt if the farmer and spouse had non-farm income exceeding $40,000 each year for the three preceding calendar years. This provision does not apply to a retired farmer, beginning farmer, or surviving spouse of a farmer.


11. A residence is exempt if it is situated on a farm and remains occupied by the retired farmer who owned and occupied it as a farmer at the time of retirement.


12. A residence occupied by the surviving spouse of a farmer who owned and occupied the residence as an active farmer at the time of death is exempt through the end of the fifth taxable year after the year of the farmer’s death.


A residence occupied by the surviving spouse of a farmer who owned and occupied the residence as a retired farmer at the time of death remains exempt for as long as the residence is continuously occupied by the farmer’s surviving spouse.


13. If the agricultural land acreage owned by the retired farmer diminishes to less than 10 acres after retirement, the residence may continue to be exempt provided that the residence qualified for the exemption at the time the farmer retired.


14. A residence in which a farmer resides and operates a bed and breakfast facility is exempt provided the farmer and the residence meet the other qualifications for the exemption.

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