Selling Texas land with an ag exemption: rollback taxes and what the buyer keeps

An ag exemption is really a special appraisal

People call it an ag exemption. The Texas Comptroller calls it special appraisal, and the difference matters: qualifying land is appraised on its productivity value, meaning what it can earn from farming, ranching or timber, instead of its market value. The gap is large. By the Comptroller's figures, Texas ag land averaged $86 an acre in productivity value in 2024, against $3,762 an acre in market value.

A seller is likely to run into one of these:

• 1-d-1 open-space agricultural valuation (Tax Code 23.51 to 23.60), the common one. The land must be in agricultural use now, to the degree of intensity typical in the area, and must have been in agricultural or timber use for 5 of the preceding 7 years.
• Wildlife management use, which counts as an agricultural use under 1-d-1.
• Timber valuation, under its own subchapter (Tax Code 23.71 to 23.79).
• The older 1-d designation, where the owner must be an individual whose main occupation and income is farming and must apply every year. Its rules on a sale are different, as explained below.

Does selling trigger a rollback tax?

For 1-d-1 land, no. The Comptroller's Manual for the Appraisal of Agricultural Land (October 2024) states that selling the property doesn't trigger the 1-d-1 rollback. The rollback is a penalty for taking land out of agricultural use.

When the use does change, Tax Code 23.55 imposes an additional tax: the difference between the taxes paid at ag value and the taxes that would have been paid at market value, for each of the 3 years before the year of the change. Two recent laws made it smaller:

• HB 1743 (2019) cut the lookback from 5 years to 3.
• HB 3833 (2021) removed the interest charge.

A tax lien attaches to the land on the date the use changes. The manual explains that whoever owns the land on that date is personally liable, but the lien can be enforced against the land whoever owns it later.

A change of use is a physical change, such as building on the land or ending agricultural use entirely. According to the manual, cutting back to less than the typical intensity can cost the valuation without a rollback, as long as the land stays in agricultural use. The chief appraiser decides, and you can protest the decision to the appraisal review board within 30 days of the notice.

What a rollback can cost

The Comptroller's own example for 50 acres, counting county taxes only:

A real bill also includes the school district and any city or special district, so the total on a tract like this would be higher.

How the contract splits rollback taxes

The law taxes the change of use. The contract decides whether buyer or seller bears it. Paragraph 13B of both the TREC Unimproved Property Contract (form 9-18) and the Farm and Ranch Contract (form 25-17) says:

• If the sale or the buyer's use after closing results in additional taxes for periods before closing, the buyer pays.
• If the seller's use or change of use before closing causes them, the seller pays.
• Both obligations survive closing.

So if you sell pasture to a buyer who builds houses on it, the rollback is the buyer's under the standard contract. If you stopped grazing and cleared a homesite before closing, it may be yours.

The vacant land notice. Property Code 5.010 requires a seller of vacant land to put a bold notice in the contract warning that the buyer may not keep the special appraisal and that the transfer or a later change of use can bring additional taxes. The notice can be left out if a separate paragraph of the contract says who pays those taxes, and the TREC forms include that kind of paragraph in 13B. If a contract has neither, the buyer can recover from the seller any additional taxes caused by the transfer, or by a change of use within 5 years. If you write your own contract, include one or the other. Our guide to selling land without a realtor covers the other notices Texas requires.

Does the new owner keep the valuation?

The valuation depends on how the land is used, so a buyer who keeps it in qualifying use can keep it. The 5-of-7-year test looks at how the land was used, not who owned it. But a change of owner usually means paperwork:

• A new application. Once approved, 1-d-1 land stays qualified year after year unless the ownership changes, eligibility ends or the chief appraiser asks for a new application (Tax Code 23.54). A new owner generally files the Comptroller's Form 50-129 with the appraisal district before May 1. The chief appraiser can extend that deadline by up to 60 days for good cause.
• The 2026 change. Since January 1, 2026, under HB 1244, ownership isn't treated as changing if the new owner uses the land in materially the same way the former owner did the year before, and that use is overseen or conducted by the same individuals. A transfer to a surviving spouse already counted as no change.
• Late applications. An application filed after the deadline but before the appraisal review board approves the records (usually in July) can still be approved, with a penalty of 10% of the tax savings. There's no penalty for a late filing by a surviving spouse, child or executor after an owner's death, if filed by the tax delinquency date. There's also none for a new owner continuing the same use with the same people, if filed by the later of the delinquency date or one year after the transfer.

Give your buyer what they'll need: the approval letter or appraisal notice, any grazing or hay lease, and records of how the land has been used. If a tenant runs cattle or cuts hay under a lease that continues after the sale, ask the appraisal district whether the 2026 same-use rule covers your buyer.

The older 1-d designation: a sale does trigger a rollback

Under the older 1-d designation (Tax Code 23.41 to 23.48), selling the land triggers a rollback on its own, just as a change to non-agricultural use does. It covers the additional taxes for the 3 preceding years, plus interest at the rate for delinquent taxes (23.46). Check your appraisal district record, or ask the district, which designation your land has before you sign a contract. North Texas owners can find their appraisal district's search page in our guide to selling land in North Texas.

Wildlife management and timber valuations

Wildlife management use is an agricultural use under 1-d-1. The land must have been under ag or timber valuation when the wildlife use began, and the owner must actively use at least three of seven practices: habitat control, erosion control, predator control, supplemental water, supplemental food, shelters and census counts (Tax Code 23.51). A wildlife management plan on the Texas Parks and Wildlife Department's form goes in with the application, and the appraisal district can require an annual report.

For a seller, two points matter. A new owner generally files a new application with their own plan, unless the 2026 same-use rule applies. And under the Comptroller's wildlife guidelines, a tract that is smaller than it was on January 1 of the previous year becomes subject to a minimum acreage requirement, which the chief appraiser sets within a range for the region. Selling part of a wildlife-valued tract can trigger that test.

Timber valuation works much like 1-d-1: timber or qualifying agricultural use for 5 of the preceding 7 years, and a 3-year rollback on a change of use (Tax Code 23.72 and 23.76). The 2026 same-use rule was written into the agricultural section, so a new owner of timber land should expect to file a new application after the sale (23.75).

Selling part of an ag-valued tract

If only part of a parcel changes use, the rollback applies only to that part (Tax Code 23.55). Sell 10 acres off a 200-acre place, and if the buyer builds a house there, the rollback is figured on the land that changed use, and paragraph 13B decides who pays.

Each piece then has to qualify on its own. The buyer's smaller tract must meet the appraisal district's degree-of-intensity standard for its use, and the land you keep must still meet it too. Ask the appraisal district before you agree on where the line goes.

A checklist before you sell

1. Look up your land on the appraisal district website and confirm whether it has 1-d-1, 1-d, wildlife or timber valuation.
2. Gather the approval letter, any leases and records of how the land is used.
3. Ask the buyer what they plan to do with the land.
4. Make sure the contract has a rollback paragraph like 13B, or the Property Code 5.010 notice.
5. Keep the land in its current use until closing.
6. Remind the buyer to file a new application before May 1, unless the same-use rule applies.

A rollback, if any, is one of several costs covered in our guide to what it costs to sell land in Texas. Special appraisal questions can turn on local facts, so ask your appraisal district, and a Texas real estate attorney if the contract is unusual.

Whether you sell through an agent, on your own, or to a land company like ours, the valuation is worth protecting. If you'd like help, tell us about your land and we'll check its appraisal status as part of our research before we talk price.