Purdue Cooperative Extension Service
Farm Land Assessment for Property Taxes in Indiana
Larry DeBoer Department of Agricultural Economics Purdue University
February 2011
For more information DeBoer’s Indiana Local Government Information Website: www.agecon.purdue.edu/crd/Localgov
Farm Land Tax Bills • Assessed Value – Base Rate per Acre, recalculated each year by DLGF – times Productivity Factor, measuring soil productivity for corn – (for some acreage) less an Influence Factor, adjusting for land attributes that reduce productivity (e.g. frequent flooding)
• Times Tax Rate – The sum of the tax rates of the jurisdictions where the acreage is located (county, township, school corporation, etc.)
• Equals the Tax Bill
Base Rate per Acre of Farmland for Property Taxation, Actual 1980-2012; and Estimated 2013-2014 2000 Annual Trending with Capitalization Formula, 2008-
1800 1400
Capitalization Formula, 2003
1200 1000 800 600
400
Year Taxes Paid (Pay Year)
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2014
2012
2010
2008
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
0
2006
200
2004
Trending and Rate Freeze, 2006-07
Negotiated Rate, 1980-2002
1980
Dollars per Acre
1600
New Formula Drops Highest Value, 2011-
Calculation of the Base Rate for an Acre of Farmland Assessment Year 2010; Tax Year 2011 NET INCOMES
MARKET VALUE IN USE
Year
Cash Rent
Operating
Cap. Rate
2002 2003 2004 2005 2006 2007
105 106 104 110 110 122
20 71 135 59 74 184
7.02% 6.29% 6.35% 7.22% 8.18% 7.94%
Cash Rent Operating
1,496 1,685 1,638 1,524 1,345 1,537
285 1,129 2,126 817 905 2,317
Average Market Value in Use
Average
890 1,407 1,882 1,170 1,125 1,927 $1,290
Assessment Year 2011; Tax Year 2012 NET INCOMES
MARKET VALUE IN USE
Year
Cash Rent
Operating
Cap. Rate
2003 2004 2005 2006 2007 2008
106 104 110 110 122 140
71 135 59 74 184 189
6.29% 6.35% 7.22% 8.18% 7.94% 6.56%
Cash Rent Operating
1,685 1,638 1,524 1,345 1,537 2,134
1,129 2,126 817 905 2,317 2,881
Average Market Value in Use
Average
1,407 1,882 1,170 1,125 1,927 2,508 $1,500
Calculations of base rates set by the Indiana Department of Local Government Finance for taxes in 2011 and 2012.
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Calculation of the Base Rate for an Acre of Farmland Assessment Year 2012; Tax Year 2013 NET INCOMES
MARKET VALUE IN USE
Year
Cash Rent
Operating
Cap. Rate
2004 2005 2006 2007 2008 2009
104 110 110 122 140 142
135 59 74 184 189 121
6.35% 7.22% 8.18% 7.94% 6.56% 6.17%
Cash Rent Operating
1,638 1,524 1,345 1,537 2,134 2,301
2,126 817 905 2,317 2,881 1,961
Average Market Value in Use
Average
1,882 1,170 1,125 1,927 2,508 2,131 $1,650
Assessment Year 2013; Tax Year 2014 NET INCOMES
MARKET VALUE IN USE
Year
Cash Rent
Operating
Cap. Rate
2005 2006 2007 2008 2009 2010
110 110 122 140 142 144
59 74 184 189 121 205
7.22% 8.18% 7.94% 6.56% 6.17% 5.99%
Cash Rent Operating
1,524 1,345 1,537 2,134 2,301 2,404
817 905 2,317 2,881 1,961 3,422
Average Market Value in Use
Average
1,170 1,125 1,927 2,508 2,131 2,913 $1,770
Calculations are estimates of base rates for taxes in 2013 and 2014, based on the revised formula and data for 2009 and 2010 (some 2010 data are estimated), by Larry DeBoer, Purdue University.
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Calculation of Net Operating Income per Acre Commodity Contribution Margin
Corn 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Beans 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Corn Yield 146 156 121 146 168 154 157 154 160 171 176
Beans Yield 46 49 42 38 52 49 50 46 45 49 49
Average Gross Income 274 303 267 345 418 303 375 542 797 658 708
Avg. Price 1.87 1.89 2.20 2.34 2.28 1.89 2.47 3.46 4.47 3.87 4.15
Average Gross Income 217 218 208 241 352 282 296 371 472 493 518
Avg. Price 4.71 4.44 5.00 6.35 6.84 5.75 5.91 8.06 10.48 10.06 10.57
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Variable Costs-Corn 139 155 147 154 171 184 222 239 380 425 351
Average Contribution Margin--Corn 135 140 119 188 211 107 166 293 335 237 380
Variable Costs-Beans 89 93 97 99 106 114 125 120 182 223 194
Average Contribution Margin-Beans 128 125 111 142 246 168 171 251 290 270 324
Calculation of Overhead Costs
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Overhead Machinery Handling 52 7 52 7 52 7 52 7 52 7 52 7 52 7 43 9 58 9 66 11 77 12
Labor 37 37 37 37 37 39 39 30 52 52 52
Property Total Tax Overhead 11 107 11 107 11 107 14 110 18 114 16 114 17 115 17 99 17 136 16 145 17 158
Calculation of Value in Use
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Gov't Payments 73 72 25 33 41 71 41 23 25 24 23
Total Net Contribution Return to Average FRB Value in Margin Land Cap. Rate Use 168 61 9.57% 637 168 61 8.01% 762 127 20 7.02% 285 182 72 6.29% 1145 249 135 6.35% 2126 173 59 7.22% 817 189 74 8.18% 905 284 185 7.94% 2330 325 189 6.56% 2881 265 120 6.17% 1945 364 206 5.99% 3439
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$2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800
Farm Land Base Rates: New and Old Formulas
1,290
1,400
1,500
1,700
1,650
1,810
(Actual 2010-2012; Estimated 2013-2014)
1,250
New Formula (drop highest value)
2013
$600
$200 $0 2012
Old Formula (6-year average)
2011
$400
2010
Pay Year
1,770
1,960
2014
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Tax Cap Credits by Property Type, 2010 (Total Tax Caps: $474.6 million)
Personal 9.7% Homesteads 22.2%
Other Ag Business 0.7% Farmland 0.5% Mobile Home Land 0.6%
Other Real 18.8%
Low-Income Elderly 0.6%
Other Residential 33.5%
Apartments 12.0%
Long Term Care 1.5%
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