LAND LESSONS- What is the Maryland Agriculture Recapture Tax? 

In an effort to promote the raising of livestock or the growing of agricultural outputs such as grains, nuts, fruits and vegetables, Maryland assesses land used for productive agriculture at a lower taxable value. This yields the tax on a farmer’s field in the hundreds of dollars rather than thousands of dollars compared if the land was simply an undeveloped parcel.  
 
In order to receive this favorable treatment, the land must be five acres or greater and the farmer must have the intent of earning at least $2500 annually.  
 
In return for favorable property taxes, the landowner understands that when the property is removed from agriculture or is sold for development, both the county of record and Maryland benefit in the landowner’s windfall by means of the agricultural recapture tax. The tax is based on the sales price as shown on the settlement statement(s).  The tax is calculated as follows:  

On land less than 19-acres, the county receives a tax of 4% of the sales price.  
On land greater than 19-acres pay more, 5% of the sales price.  
Maryland assesses an additional surcharge tax equal to 25% of the taxable amount paid to the county.  

  
Here are two scenarios to illustrate the issue.  

After having the land in the family for nearly a hundred and fifty years, Mrs. Jones sells her 17-acre tract of land in Baltimore County to a Real Estate Developer for the construction of a residential community. After accounting for wetlands, slopes, roads, storm water and open space the property will yield 39 single-family detached lots. The developer pays Mrs. Jones $100,000 for every lot thus, her sales price is $3,900,000.  
 
$3,900,000 sales price x 4% (19-acres or fewer) = $156,000 to Baltimore County at settlement.
25% of 156,000=$39,000 due to the Comptroller of MD for surcharge on the tax paid to Baltimore County. Total agriculture recapture tax on this sale is $195,000.  
 

Farm Holdings sells 300-acres of farmland in Cecil County to a national builder for a large master plan community of 2700 units. Over time the builder will pay the Seller $30,000 per approved townhome lot and $55,000 detached lot. The total price is equal to $94,000,000.  
 
$94,000,000 sales price x 5% = $4,700,000 paid to Cecil County at settlement.  
25% of $4,700,000 = $1,175,000 due to the Comptroller of MD for surcharge on the tax paid to Cecil Co.  Total agriculture recapture tax on this sale is $5,875,000.