St. Mary’s County Agricultural Transfer Tax: Surcharge and Exemptions

The St. Mary’s County agricultural transfer tax is a Maryland state tax that applies when farmland carrying an agricultural use assessment is sold or converted to non-agricultural use. The base rate runs 3% to 5% of the net sale price depending on acreage and improvements, with a mandatory 25% surcharge added on top. A buyer who commits to keep farming the land for five years can file a Declaration of Intent and avoid the tax entirely.¹

What Triggers the Tax

Two things have to be true for the tax to apply. The land must hold (or have recently held) an agricultural use assessment under Maryland law, and the transfer must result in the land moving to a non-agricultural use such as residential or commercial development.¹

Parcels of 20 acres or more that carry the agricultural assessment are automatically covered. Smaller parcels are covered too if the land is individually assessed for farm use or is part of a larger farming operation of 20 acres or more.² Changing use is enough on its own. If you convert a working farm into a subdivision without selling it, the tax still applies.

Rates and the 25% Surcharge

Maryland sets three base rates for agricultural transfers:

20 acres or more: 5%, regardless of improvements
Under 20 acres, unimproved: 4%
Under 20 acres with site improvements (well, septic, farm buildings): 3%

On top of the base rate, every agricultural land transfer in Maryland carries a 25% surcharge. The one carve-out: transfers of 2 acres or less to a child or grandchild of the owner are exempt from the surcharge.³

When one transfer involves portions of land that fall under different rate tiers, the tax is figured separately for each portion and then added together.³

How the Taxable Amount Is Calculated

The rate applies to net consideration, not the full sale price. The statute requires subtracting two things from the deed’s consideration before the rate goes on: the assessed value of any improvements on the property, and the value of any land that doesn’t carry the agricultural assessment.⁴

In practice: a parcel that is entirely agriculturally assessed with no buildings is taxed on the full sale price. If farm buildings sit on the land, their assessed value drops out of the calculation. If the property includes a house and homesite that aren’t under the agricultural assessment, both the dwelling value and the non-agricultural land value come out first.⁵

A worked example. A 30-acre farm with no buildings sells for $500,000. The entire parcel is agriculturally assessed, so net consideration equals the full $500,000. At the 5% rate, the base tax is $25,000. The 25% surcharge adds $6,250, for a total of $31,250. If that same farm included a house assessed at $150,000, net consideration drops to $350,000, and the total with surcharge comes to $21,875.

Reductions for Land Already Taxed at Market Rate

If the land already lost its agricultural assessment and has been paying property taxes at full market rate before the transfer, the agricultural transfer tax is reduced on a sliding scale:

1 full taxable year at market rate: 25% reduction
2 consecutive taxable years: 50% reduction
3 or more consecutive taxable years: 65% reduction

The longer the owner paid at the higher property-tax rate, the bigger the discount at transfer.³

How to Avoid the Tax

Declaration of Intent to Farm

A buyer who plans to keep the land in agricultural production can avoid the tax entirely by filing a Declaration of Intent before the transfer. The declaration commits the buyer to maintaining the land in farm or agricultural use for at least five full consecutive taxable years, and the buyer must apply for the agricultural use assessment on the transferred land.⁶

Timing is strict. The declaration has to be filed with the Supervisor of Assessments before the deed is recorded, not after. The form is available through the Maryland State Department of Assessments and Taxation.⁷

Family Residential Transfers and Previously Taxed Land

Transfers within a family for residential use are exempt if the parcel doesn’t exceed the local minimum residential zoning size, which lets a farmer carve out a homesite for a family member without triggering the tax. Land that has already been subject to the agricultural transfer tax in a previous transaction is exempt from being taxed again on a later transfer.⁶

What a Broken Declaration Costs

Filing a Declaration of Intent is a five-year commitment, and breaking it is expensive. If the buyer stops farming, builds non-agricultural improvements, or loses the agricultural use assessment at any point during the five years, the tax comes due retroactively with a penalty on top.

The Supervisor of Assessments recalculates using the land’s fair market value as of the most recent July 1, not the original sale price. The applicable rate from § 13-303 is applied to that fair market value, and a 10% penalty is added.⁶ If land values have risen since the purchase, the bill is substantially higher than what the tax would have been at closing.

The tax and penalty become a lien on the land and are due on the earlier of two dates: the next property tax due date, or the date of the next transfer of any portion of the land. The owner can appeal the Supervisor’s fair market value determination, but payment isn’t suspended during the appeal.⁶

Paying the Tax in St. Mary’s County

The primary form is the Agricultural Transfer Tax Statement, which requires the property’s account number, district, map, parcel, and lot identifiers, the total acreage, and the consideration listed on the deed.⁸ The consideration figure has to match the deed exactly, because it is the starting point for every calculation. If a Declaration of Intent is being used, that separate form goes to the Supervisor of Assessments before the transfer.⁷

In St. Mary’s County, the completed forms and payment go to the County Treasurer’s Office, which handles deed transfer functions and verifies the calculations.⁹ Payment is typically required by certified check or money order. Once the Treasurer provides proof of payment, the deed goes to the Clerk of the Circuit Court in Leonardtown for recording. The Clerk will not record the deed without evidence that the tax has been paid. Buyers and sellers working with a title company will see these costs itemized on the settlement statement.

Federal Capital Gains Are Separate

The state agricultural transfer tax is its own obligation; it does not replace federal income tax on the sale. Selling farmland at a profit triggers federal capital gains tax. Land held longer than one year qualifies for long-term capital gains rates of 0%, 15%, or 20% depending on the seller’s taxable income. Land held a year or less is taxed as ordinary income, which can reach 37%.

A seller who plans to reinvest in other farmland or investment real property may be able to defer the federal gain through a like-kind exchange under 26 U.S.C. § 1031. The property must be held for productive use or investment, which rules out personal residences and farm equipment. Replacement properties have to be identified within 45 days of the sale and the purchase closed within 180 days, and a qualified intermediary must hold the proceeds during the exchange period.¹⁰ A 1031 exchange defers the federal capital gains tax but has no effect on the Maryland agricultural transfer tax, which is still owed based on the change in use or ownership.

1
Maryland General Assembly. Maryland Code Tax-Property 13-302 – Imposition of Tax
2
Maryland General Assembly. Maryland Code Tax-Property 13-302 – Imposition of Tax
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Maryland General Assembly. Maryland Code Tax-Property 13-303 – Rate of Tax
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Maryland General Assembly. Maryland Code Tax-Property 13-304 – Consideration
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Maryland State Department of Assessments and Taxation. Agricultural Transfer Tax
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New York Codes, Rules and Regulations. Maryland Code Tax-Property 13-305 – Exemptions
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Maryland State Department of Assessments and Taxation. Agricultural Use Declaration of Intent
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Maryland Department of Assessments and Taxation. Agricultural Transfer Tax Statement
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St. Mary’s County Government. Office of the County Treasurer
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Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment