Methods of Land Ownership Free of Property Tax
Property taxes are a big source of revenue for state and local governments. In some cases, however, you can use state and federal laws to own your land tax-free. Depending on your state, you can claim a property tax exemption based on how the land is used or if you have a particular disability that qualifies for a tax-free exemption. In some cases, you can make a third party responsible for paying your property taxes.
All 50 states allow you to own property tax-free if you are a non-profit organization. Incorporating as a non-profit under IRS regulations is not enough. In exchange for the property tax exemption, your state expects to receive a tax saving benefit in return. You must demonstrate that your organization operates for the public good and reduces the government’s financial obligations by providing services to the needy. Your non-profit must rely on donations as the sole source of income. As long as the building sitting on your property meets local code requirements, you can operate out of any type of structure.
Total Disability Tax Exemption
You can own your land tax-free if you qualify as a disabled person under federal or state regulations. You must claim homestead exemption on the home you live in and it must be your permanent residence. Veterans are exempt from paying property taxes if the Veteran’s Administration has certified the disability is service-connected. States also provide property tax exemptions for their physically disabled residents. For example, a Florida resident can live in his homestead property tax-free if he is a paraplegic, hemiplegic, totally and permanently disabled or legally blind.
States recognize the importance of agriculture and provide partial or full property tax exemptions for farming activities. Each state has its own criteria of what farming activities qualifies to make your land property tax-exempt. You can own your land tax-free in Connecticut if you hold your property in a non-profit agricultural trust and actively farm the land. Under Michigan law, you can claim a homestead exemption and an agricultural property tax exemption on the same property. Your state’s department of revenue website has specific information on what farming activities qualify as agricultural use.
Third Party Tax Payment
You can still own your property tax-free by having a third party pay the taxes. You can rent out your property and specify that your tenants either pay the property tax outright or make it part of their monthly rental payment. If you rent to commercial tenants, a double net or triple net lease specifies that your tenant is responsible for paying the property taxes. You may want to have a real estate attorney draw up the lease so that it does not violate any local or state law.
- Andrew Young School of Public Studies: The Property Tax Exemption for Nonprofits
- Connecticut: Qualifications for Farmer/Agriculture Property Tax Exemption
- Michigan State Tax Commission: Qualified Agricultural Property Exemption Guidelines
- O’Donnell Commercial Real Estate: Single, double, or triple net lease…what’s this mean?
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.