Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What is the main purpose of roll back taxes?

1. To reduce property taxes for new buyers

2. To calculate the taxes on agricultural land

3. To assess the tax difference based on land value

4. To estimate future property values

The correct answer is: To assess the tax difference based on land value

The main purpose of roll back taxes is to assess the tax difference based on land value. When agricultural land is converted to a use that does not qualify for agricultural appraisal, roll back taxes are triggered. This reassessment applies to the difference in taxes due since the land was last assessed at its agricultural value. Essentially, it recaptures the tax benefit that the landowner received while the property was assessed at a lower agricultural valuation. The roll back tax is particularly relevant in situations where landowners might change the use of their land, such as transitioning it from agricultural use to residential or commercial development. In such cases, the taxing authority calculates the additional taxes owed based on the current market value, which typically exceeds the previous lower agricultural valuation. Overall, this mechanism is designed to ensure that properties not used for their designated agricultural purposes contribute fairly to local tax revenues based on their true value.