Montana’s property tax system is notoriously complex, involving intricate calculations and numerous regulations to fairly apportion public service costs, such as education and law enforcement, across countless properties. Defining fairness in taxation is challenging, and lawmakers struggle to craft a tax code devoid of loopholes. A recent investigation by Montana Free Press and High Country News sheds light on a longstanding issue: potential misuse of a property tax break meant for farms and ranches by luxury homeowners on rural lands.
Agricultural Tax Status Provides Significant Savings
Farm and ranch properties in Montana benefit from a reduced tax rate compared to residential properties, as their land value is assessed based on agricultural production rather than market value. For example, the average residential land value in Montana was about $127,000 in 2023, while some grazing lands were valued at less than $50 per acre.
Annual Tax Savings Can Be Substantial
This tax break can lead to substantial savings. A property on the Flathead River was taxed about $7,000 in 2023, whereas a neighboring residential property paid $9,100. Properties under 20 acres paid a median land tax of $1,609 per acre, compared to $6.61 for agricultural parcels.
Concerns Over Loophole Exploitation
Critics argue it’s too easy for luxury properties to gain agricultural tax benefits. Unlike other western states, Montana grants agricultural tax treatment to large properties without requiring proof of agricultural use. Properties over 160 acres automatically receive full agricultural designation, while those over 20 acres receive partial benefits.
Luxury Homes Reap Agricultural Tax Benefits
In 2023, over 3,000 million-dollar properties in Montana qualified for agricultural tax breaks. Governor Greg Gianforte’s Bozeman home, for example, paid $5.75 per acre in land taxes, much lower than a neighboring residential property that paid $826 per acre.
Potential Legislative Changes
The Montana Legislature is contemplating bills to tighten agricultural tax qualifications and increase taxes on homesite portions of high-value agricultural properties. Past efforts to alter these rules have met resistance, but current proposals aim to address these issues politically.
READ MORE: Montana’s agricultural tax rules slash bills for thousands of million-dollar homes.
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