Roll-Back Taxes are applied when all or a portion of a property that has been receiving the Agricultural Use Value changes classification. An example would be when a property owner of land that is in Agricultural use builds a new house that is for residential use. The appraiser must determine the amount of the property that must be changed and then roll-back taxes are applied.
Effective January 1, 2021, rollback taxes are to be assessed over a three-year period rather than the previous five-year period.
Roll-back taxes are the difference between Agricultural use value and the property’s actual market value. The difference is multiplied by the millage rate in the appropriate district and that results in the amount of tax due.
Rollback Tax Estimation Formula
1. Determine Market Value of subject property for the year in question (County Appraisal) value. This is only the value of the subject property in question, i.e., there may have been 10 acres for agricultural use and only 1 acre being developed – so 1/10 of the overall value of the entire agricultural plot)
2. Determine Market Value Assessment (Multiply the Market Value by 0.06)
3. Determine Agricultural Market Value of the Subject Property for the year in question (the value that taxes have been paid on based upon agricultural use)
4. Determine Agricultural Value Assessment of subject property (Multiple Agricultural Value by 0.04)
5. Compute the difference of Line 2 & Line 4 (think of this as the deferred tax value while in Agricultural status)
6. Multiply this resulting difference (in line 5.) by the Millage Rate, for the year in question
7. Repeat the above for the 2 additional roll-back years (roll-back taxes are to be assessed over the 3 year period)
Example
Current Year
1. Market Value = $20,000
2. Market Value Assessment = $20,000 x 0.06 = $1,200
3. Agricultural Market Value = $1,000
4. Agricultural Value Assessment = $1,000 x .0.04 = $40
5. $1200 - $40 = $1,160
6. $1,160 x 0.15 = $174 (example only assuming millage rate 0.15 for the current year)
Then…for all 3 years….
7. $174 x 3 = $522 (to simplify-assuming all market value data and millage data is completely static for all 3 years)
NOTE: In South Carolina, there is no rule as to whether the purchaser or seller pays the rollback tax - the payment of rollback taxes typically is negotiated prior to execution of the contract.
See Section 12-43-220 of the SC Code of Laws for more details.