Agricultural Classification

Per Iowa Administrative Code 701-71.1 (3), for assessment and property taxation purposes, the classification of agricultural real estate does not include recreational or hobby farming, recreational or hobby gardening, nor the keeping of livestock for personal, recreational, or hobby purposes

Per the law, ag property is to be assessed (for taxation) based on it’s “productivity and net earning capacity”.

Therefore, for assessment purposes, four key phrases from Iowa law are used when determining if a property qualifies for agricultural classification, and in this order:

  1. Present Use 
    1. Present use of the property as of January 1. (of the assessment year).
    2. There must be active agricultural ‘production’ use taking place on the property. 
  2. Primary/Principle Use 
    1. The “primary” (principal, main, predominant) use of the property is how the property will be assessed (classified & valued) for taxation purposes. 
    2. For properties with multiple uses, like agricultural and residential on the same property, the “primary” use of the property will be used for assessment purposes. 
    3. The Assessor will use best judgment and consider many facts in making this determination, and on a case-by-case and property-by-property basis. 
    4. To be considered as primarily agricultural, “agricultural production” must be the primary or principal use of the property. 
    5. Per Iowa law, agricultural production includes
      1. The raising and harvesting of crops, forest trees, fruit trees
      2. The rearing, feeding, and managing of livestock 
      3. Horticulture 
      4. Wood, waste and pasture lands may also be considered primarily agricultural, but only if that land is held or operated directly in conjunction with other “primarily” agricultural production tracts of real estate. 
        1. This means, ag production must first be the primary use of the ‘other’ property before the non-ag-production real estate can also be included for ag for assessment purposes.  
  3. Being used “in good faith” (for agricultural production purposes) 
    1. The “honesty of intention” of the ag activity is for the purposes of farming and making money from it and not just for hobby purposes, to lower property taxes, or for any other reason than farming. 
  4. All for an intended profit   
    1. All of the ag production activity on the property must be operated in a business manner with the intent of making a regular and continuous profit, or ‘net earning’.  
    2. For ag production, “net” is the amount left over after all operating income and all operating expenses are considered.