Alabama has the lowest property taxes in the nation according to a 2009 report from the Washington-based Tax Foundation.
The report was based on information gathered in fiscal year 2007. According to the report, Alabama landowners paid an average of only $455 of property taxes, ranking us #50 in revenue generated by states through property taxes. (This information is also cited in an October 2008, article on Landreport.com).
Low property tax is one very good reason to invest in rural land in Alabama. If you were considering a piece of rural land in Perry County, where I live, you would be looking at a low millage rate of 47 mills. That means for every $1,000 of assessed value, you would only owe $47.00 in annual property taxes. (Assessed value is very different from fair market value.) If you owned a piece of property that was assessed at $100,000, you would owe $4700 in taxes.
How Alabama Property Tax is Calculated
According to the Alabama Department of Revenue, Amendment 373 of Alabama's Constitution, "provides that all real and personal business property will be assessed at 20% of its fair market value". So if your business owns a property that has a fair market value of $100,000, it will be assessed at $20,000 ($100,000 x 0.20= $20,000).
To calculate the annual ad valorem ("according to value") tax, one must multiply the millage rate by the assessed value. For instance, if your business owned some land with a fair market value of $100,000 in Perry County, property taxes would be assessed at $20,000. The millage rate of $0.047 would be multiplied by the $20,000 assessed value for an annual total ad valorem tax liability of $940.
Assessment rates for individual owners can be as low as 10%, depending on the classification of the property. Much rural land in Alabama is Class III, which is defined as "All agricultural, forest and single family, owner occupied residential property, including owner occupied residential manufactured homes located on land owned by the manufactured home owner, and historic buildings and sites".
This means your personal land in the scenario above that had a fair market value of $100,000 would be assessed at 10%, or $10,000. Your ad valorem tax liability would be reduced to only $470. This is extremely cheap compared with other states. MSN.com has an interactive map that lets you compare the property tax levels by state.
Alabama Timberland Taxes
Alabama timberland has a special tax of $0.10 per acre. Additionally, property taxes for timberland (agricultural Class III) are calculated on current use values.
Alabama is unique in that tax calculations are made based on the current use of the property and not fair market value. Fair Market Value is defined as "The estimated price at which the property would bring at a fair voluntary sale." Current Use Value is defined as "The value of eligible taxable property based on the use being made of that property on October 1 of any taxable year; provided, that no consideration shall be taken of the prospective value such property might have if it were put to some other possible use."
Allowing rural land taxes to be calculated on Current Use Value and not Market Value saves most landowners considerable money on property tax. This way, you are paying for what your land is actually used for, and not the highest and best use (HBU). Basing taxes on HBU or market value would force many owners to pay substantially more in taxes or sell their land.
Alabama Department of Revenue Website
The ADOR website offers lots of helpful information for landowners pertaining to understanding and calculating property taxes.
Millage Rates- This link offers a break down of millage rates for every county in the state, including the municipality millage rates.
County Appraisals and Assessments- This interactive map links to all Alabama County Appraisal and Assessment offices with online records. The counties typically use Emapsplus, Flagship GIS, or Delta Computer Systems. All but 13 Alabama counties have some tax assessor information available online.
Land and Tax Delinquent Property- For anyone considering buying a property at a tax sale, you should first consult this page about Alabama's guidelines on tax delinquent properties. Alabama has a 3-year right of redemption, so investors need to be certain about what they are purchasing before jumping into one of those deals.
Tax Assessor Mapping- If you have ever wondered how tax assessor maps are derived or how a parcel number is generated, here is a link to some faq's about those maps.
Alabama has some of the cheapest land and lowest property taxes in the nation, making this a great place to own some rural property. If you are considering purchasing rural land in Alabama, please contact me and let me know how I can be helpful.