"Buying South Carolina Land Taxed as Farmland: How Do Rollback Taxes Work, and Who Pays Them?"

You are walking the back line of twelve acres in South Carolina with the listing open on your phone, and the hay rolls from the last cutting are still lined up along the fence. The property tax figure on that listing is small, because the county has been taxing the pasture on what its soil can grow rather than on what the land would sell for.

If you buy South Carolina land under the agricultural use assessment, you get that lower assessment by filing your own application with the county assessor, usually by January 15. If you build a home or change the use, rollback taxes come due for that year and the three before it, and your contract decides who pays them.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, including South Carolina, NMLS #483943, through C2 Financial Corporation. This classification touches the tax figure a lender qualifies you on, your escrow account and your closing statement.

The agricultural use assessment in South Carolina

South Carolina lets a county tax qualifying farm and timber land on what the land can produce instead of what it would sell for, under S.C. Code § 12-43-220(d). The county calls that figure the use value and works it out from the soil on the property. Aiken County's assessor says it is almost always considerably less than market value.

For land owned by individuals and partnerships, the county figures the tax on 4% of the use value, which is part of why the bill on farmland stays so small.

The land has to be in real agricultural use and big enough to count. County forms like the one Abbeville County publishes set these minimums:

• Timberland: five acres or more, wooded and actively growing trees for commercial use.
• Other farmland: ten acres or more, such as pasture, hay or row crops.
• Smaller tracts: these can still qualify when they are next to, or under the same management as, a tract that meets the minimum. A small non-timber tract can also qualify on at least $1,000 of gross farm income in three of the last five years.

If a small tract qualifies on that income route, please have your complete South Carolina and federal income tax returns, all pages and schedules, ready when you apply. Spartanburg County's application asks for them with the application because they show the farm income.

The agricultural use assessment does not transfer to a new owner

The seller's approval ends when the seller's ownership does, so you file a new application in your own name. Greenville County's council materials point to § 12-43-220(d)(3) on that. You make the application in writing for the first tax year you want the assessment, on or before the date after which the county adds a penalty to unpaid taxes.

In most counties that date is January 15 of the year after you close. Anderson County's application is plain about it: if the application is not filed by January 15, the land is taxed at its market value for that tax year. The county governing body can extend the time if you show reasonable cause, but that is the county's decision to make.

After you are approved, the application renews each year until the use or the title changes, as Jasper County's assessor confirms. The county mails the new application to the owner's last known address, so please keep your address current and file it on time.

Rollback taxes in South Carolina

Rollback taxes are the difference between the tax that was paid on the land's use value and the tax that would have been paid at the land's new use. South Carolina bills them when land that had the agricultural assessment is put to a different use. Since January 1, 2021, the county looks back over the tax year the use changes and the three tax years before it. Burr & Forman's write-up of the 2020 change notes that the window used to be five years.

A sale by itself only changes the title. The same 2020 act says a change in use is shown by an action the owner takes that is inconsistent with agricultural use, according to the Department of Revenue's summary of the act.

Three details change how I would plan your purchase.

First, the bill covers only the part of the land that changed. Calhoun County's assessor bills rollback to the portion whose use changed. If you build a home on two acres of a twenty-acre tract, the other eighteen can stay in agricultural use if they still qualify.

Second, the owner on December 31 of the year the use changes is the one who owes it. Spartanburg County's agricultural use page says so, and that is also the date the county gets a claim on the property for that tax bill. If you close in May and start building in September, that owner is you.

Third, you tell the assessor about the change yourself, within six months. Dorchester County's form says the owner notifies the assessor in that time. If you miss it, the county adds a penalty of ten percent plus interest at one-half of one percent a month.

Building a home on agricultural land in South Carolina

If you are buying land to build on, the home is the change that matters most. York County's rollback tax FAQ lists building a new home, moving in a mobile home and subdividing the property as changes that can remove the agricultural use. It also confirms the county looks back three years at most.

Once the home is built, the homesite is taxed on its market value as a residence. You can apply for the 4% legal residence rate on it, which is a separate application from the agricultural one, and how to keep the 4% legal residence rate covers that filing and the rules for keeping it. The pasture or woods around the homesite can keep the agricultural assessment as long as your own application is approved and the land still qualifies.

If the seller is splitting a lot off a larger tract to sell to you, I would want the contract to say who pays before anyone signs the map of the new lot. The split itself can be the change that triggers a rollback on that lot.

If you are financing the build, how a construction-to-permanent mortgage works walks through the loan side. For a home that is already on the land, buying a home on acreage covers how the appraisal treats the land, the outbuildings and the well and septic.

The contract decides who pays rollback taxes

South Carolina law has no default rule on whether the buyer or the seller pays rollback taxes. According to Burr & Forman's article on the 2020 change, the county will not divide the bill between the two of you. Calhoun County's assessor says the sales contract, or your closing attorney at closing, decides who pays what.

That second option matters because South Carolina is an attorney-closing state. A licensed attorney runs your closing and prepares the settlement statement, and the South Carolina page covers how that works and how you choose the attorney. Your attorney can put a rollback credit on that statement when the contract calls for one.

One option is for the seller to pay, because those earlier years were the seller's years. Another is for you to pay all of it, with the price reflecting that. The two of you can also split it in whatever shares you agree on. Any of these works once it is written down before you sign. If the land stays in agricultural use under your own application, the contract can simply say who pays if the use changes later.

Rollback taxes and your mortgage payment

The lender qualifies you on a property tax figure it can document. On farmland, that is usually the current bill, which reflects the agricultural assessment. Your escrow account is funded from that same bill at closing. How an escrow account collects taxes and insurance explains the account, the cushion and the yearly analysis.

Two things can change the figure after you close. When you build, the homesite and the new home come onto the bill at market value, and the escrow analysis catches up to the larger bill over the following year. What happens to your property taxes after you buy shows the same pattern when a new owner's first full bill arrives. Then, if a rollback is owed, there is a separate one-time bill for the earlier years. Please ask your servicer before it arrives whether it will pay that bill from escrow or expect you to pay it directly. A one-time bill paid from the account can leave a shortage that raises your payment for a year.

Your list before you close on the land

I would work through these with you in this order.

1. You'll want to ask the county assessor whether the land has the agricultural assessment now, and on how many acres.
2. Please decide what you plan to do with each part of the land, because that plan decides whether a rollback is coming and on how much ground.
3. I would ask your attorney to put the rollback in the contract, including who pays, for which years, and what happens if a lot is split off before closing.
4. Please ask your closing attorney to show any rollback credit on the settlement statement, so it is settled at the closing table instead of by a bill next fall.
5. You'll want to file your own agricultural use application by January 15 of the year after you close, or by your county's own deadline if it differs, and please keep a copy and the date you filed it.
6. If you change the use, please tell the assessor within six months, and once you move in, file the 4% legal residence application on the homesite.

An example with made-up numbers

The numbers and dates below are made up to show how it works. This is not a real property, a real bill or an estimate for any county.

You buy twelve acres of pasture in March. The land has the agricultural assessment, and the tax on it is $96 a year. Before you sign, you tell the seller you plan to build on one and a half acres near the road. The contract names that homesite and says the seller pays its rollback as a credit at closing.

You clear the homesite and start building in September. That September change makes you the December 31 owner in the year the use changed. You file your own agricultural use application on the rest of the land the following January.

The tax on that acre and a half at its use value was $12 a year. Taxed as a residential lot, it would have been $410 a year. The rollback is the difference, $398, for the year of the change and the three years before it:

Residential tax on the homesite      $410
Use-value tax on the homesite        - $12
                                     -----
Difference per year                   $398
Years (change year + three)            x 4
                                     -----
Rollback                            $1,592

The seller's $1,592 credit on the settlement statement covers the bill that comes the next fall. The other ten and a half acres keep the agricultural assessment under your own application.

Your next step

If you are weighing land in South Carolina, you can see pricing for a South Carolina purchase on your own, with nothing to sign up for and no credit pull. Choose a rate option that works best for you, and know that the selection can change as the file comes together. A South Carolina pre-approval is what stands behind your offer. If you would rather talk through the land, the contract and the build before you make an offer, you are welcome to call me.

Nothing here is a loan approval, a denial or a commitment to lend, and it is not tax or legal advice. The county assessor decides whether land qualifies for the agricultural use assessment and what rollback is owed, and your closing attorney can advise on the contract, so please confirm your own situation with both.

Common questions

Does the agricultural use assessment transfer to a new owner in South Carolina?

No. Under S.C. Code § 12-43-220(d)(3), the special assessment does not transfer when land is sold. The new owner files a written application with the county assessor for the first tax year the assessment is claimed. The deadline is the date the county starts adding penalties to unpaid taxes, which is January 15 in most counties. A late application can mean the land is taxed at market value for that year.

How many years of rollback taxes does South Carolina charge?

For land changed to a nonagricultural use after 2020, rollback taxes cover the tax year the use changes and the three tax years before it. Before January 1, 2021, the county looked back five years. The rollback is the difference between the tax paid on the land's use value and the tax that would have been paid at its new use.

Who pays rollback taxes when farmland is sold in South Carolina?

The sales contract decides. South Carolina has no default rule, and the county will not divide rollback taxes between buyer and seller. Without a contract term, the county bills the owner on December 31 of the year the use changed. The closing attorney can put a rollback credit on the settlement statement when the contract calls for one.

Does building a home on agricultural land in South Carolina trigger rollback taxes?

Usually, on the part you build on. County assessors list building a new home, moving in a mobile home and subdividing as changes that can end the agricultural use. The rollback is billed only on the portion whose use changed, so the rest of the tract can keep the agricultural assessment if it still qualifies under your own application.

How long do I have to tell the county about a change in use?

Six months. The owner notifies the county assessor within six months of a change in use. Dorchester County's form says that missing the notice adds a penalty of ten percent plus interest at one-half of one percent a month on top of the rollback taxes.