Converting Ag Land to a Homestead: Watch for Rollback Taxes

Take a parcel that has been carrying agricultural special appraisal, stop the farming, and put it to some other use, and the owner owes a rollback tax: the gap between what the ag value produced and what full market value would have cost, totted up for the three prior years. On Hill Country acreage that has appreciated hard, that catch-up bill can run into real money.

Here's the relief that surprises people buying rural land near Austin to build on: converting the tract into your own residence homestead does not trip the rollback. Under Texas Tax Code §23.55(i), simply claiming the property as your residence homestead under §11.13 is not treated as a change of use. The distinction is narrow, though. Building a home is one thing, carving the back forty into ranchettes is another, so walk your exact plan past TCAD before you close. You can reach them at traviscad.org or (512) 834-9317.