What are rollback taxes in Texas, and who pays them?

A Texas rollback tax is what the county collects when land in 1-d-1 open-space appraisal stops being used for agriculture. Under Tax Code §23.55, it recovers the tax difference for the three years before the change of use. Selling the land does not trigger it. Changing the use does. HB 3833 removed the 5 percent interest for changes of use on or after June 15, 2021.

Read that last sentence carefully, because most of what is published on this subject is out of date.

What triggers a rollback tax in Texas?

One thing: a change of use.

Tax Code §23.55(a) imposes an additional tax when land appraised as qualified open-space land is diverted to a nonagricultural use. Scraping a hay meadow for a subdivision is a change of use. Putting a pipe yard on grazing land is a change of use. Selling the tract to a developer who keeps running cattle on it for two more years is not — not yet.

The chief appraiser makes the determination. Under §23.55(b), the tax lien attaches on the date the change of use occurs, in favor of every taxing unit that was owed the difference.

Under §23.55(d), if only part of a parcel changes use, the rollback applies only to that part. Carving a two-acre homesite out of 40 acres does not roll back the other 38.

How far back does the rollback go, and is there interest?

This is where the internet is wrong, including a lot of law firm blogs and every broker page we have read.

HB 1743, passed by the 86th Legislature and effective September 1, 2019, cut the lookback from five years to three and the interest rate from seven percent to five.

HB 3833, passed by the 87th Legislature and effective June 15, 2021, went further and deleted the interest provision from §23.55(a) entirely. For a change of use occurring on or after that date, the rollback is the recovered tax difference for three years, and nothing more.

Interest can still show up, but only on the back end. If the rollback bill itself goes delinquent, ordinary delinquency penalties and interest apply like they would on any unpaid tax bill.

What does a rollback tax actually cost?

The following arithmetic is illustrative. The values and the tax rate are made up to show the mechanic. Real numbers come from the appraisal district and the taxing units for the county your land sits in.

Assume a 40-acre tract in North Texas.

Two things to take from it. First, the exposure scales with the gap between market and productive value, which in Kaufman, Rockwall, and Collin counties has been widening for a decade. Second, $27,600 is roughly the cost of a well and a septic system — it is not a rounding error on a land deal, and it needs a line in the contract.

What does not trigger a rollback?

More than people assume. Section 23.55 carves out several situations where the additional tax does not apply.

• A sale, by itself. Ownership changing hands is not a change of use. The new owner does have to file their own application to keep the valuation going — see the ag exemption page and the sequence on buying land in Texas.
• Sale or acquisition for a right-of-way, and condemnation, under §23.55(f).
• Transfer to the state or a political subdivision for a public purpose, under §23.55(f).
• A change to timber production under Subchapter E, under §23.55(g). A switch to wildlife management is not a change of use either — it keeps the same valuation under a different qualifying use.
• Claiming the land as part of a residence homestead. Under §23.55(i), that alone is not a change of use. The acreage physically converted to the homesite can still be treated as a partial change under §23.55(d).

Who pays the rollback, the buyer or the seller?

The statute does not answer this. It attaches liability to the land and leaves the allocation to the parties, which means it is a negotiated term and nothing else.

Three ways it gets handled in North Texas:

The seller pays at closing. Common when the seller knows the buyer's plan is development, and the price reflects it.

The buyer accepts the risk. Common when the buyer intends to keep the ag use going and the rollback may never be triggered.

An escrow holdback. Funds held by the title company against a rollback assessed within a defined window, released to the seller if none arrives. The fairest structure when nobody is certain what the buyer will do, and one we raise early when we are selling Texas land.

The TREC Farm and Ranch Contract addresses responsibility for rollback taxes, and the parties can allocate it further by special provision or addendum. What you cannot do is leave it silent and assume it will be fine.

What do you do if you get a rollback notice?

1. Read the notice for the determination date. The chief appraiser must deliver notice of the change-of-use determination under §23.55(e).
2. Check the date the district says the use changed. That date sets both the lien and the three-year window.
3. Confirm the acreage. If only part of the parcel changed use, §23.55(d) limits the rollback to that part.
4. File a protest if the determination is wrong. The owner may protest the determination in the same manner as other appraisal protests, under §23.55(e).
5. Watch the delinquency date. Under §23.55(e), the bill is delinquent if it is not paid before the next February 1 that is at least 20 days after the bill is delivered.
6. Pull the closing file. If your contract allocated the rollback, this is when that language earns its keep.

Frequently asked questions

Do I owe rollback taxes when I buy agricultural land in Texas?

No. Tax Code §23.55 is triggered by a change of use, not by a sale. If you buy land in 1-d-1 open-space appraisal and keep the agricultural use going, no rollback is assessed. You do have to file your own application on Comptroller form 50-129 by April 30 to keep the valuation, because the prior owner's application ended when the ownership changed.

How many years of rollback taxes can Texas collect?

Three. HB 1743, effective September 1, 2019, reduced the lookback under §23.55(a) from five years to three. The county recovers the difference between the tax that was imposed on the productive value and the tax that would have been imposed on market value, for each of the three years preceding the change of use.

Is there still 5 percent interest on Texas rollback taxes?

Not for a change of use occurring on or after June 15, 2021. HB 3833, passed by the 87th Legislature, deleted the interest provision from §23.55(a). Many published sources still quote the 5 percent figure, and some still quote seven percent and five years. If the rollback bill later goes delinquent, ordinary delinquency penalties and interest apply.

Does building a house on ag land trigger rollback taxes in Texas?

Under §23.55(i), claiming the land as part of a residence homestead is not by itself a change of use. But the acreage physically taken out of agricultural production for the house, yard, and drive can be treated as a partial change of use under §23.55(d), with the rollback applied to that portion only. Talk to the appraisal district before you break ground.

Who pays rollback taxes in a Texas land sale?

Whoever the contract says. The statute attaches the additional tax to the land and is silent on allocation, so it is negotiated. Sellers commonly pay at closing when the buyer's plan is development, buyers commonly accept the risk when they intend to continue the agricultural use, and an escrow holdback splits the difference when the outcome is uncertain.

Can you avoid rollback taxes in Texas?

By continuing a qualifying agricultural use, yes — the tax is never triggered. Section 23.55 also excludes several transfers outright, including right-of-way sales, condemnation, transfers to the state or a political subdivision for a public purpose, and a change to timber production under Subchapter E. Outside those, a change of use is a change of use.

Sources and method

Sources and method

Texas Tax Code §23.55, as amended by HB 1743, 86th Legislature (2019), effective September 1, 2019, and HB 3833, 87th Legislature (2021), effective June 15, 2021 · Texas Tax Code §§23.51, 23.54, and 23.541 · Texas Real Estate Commission Farm and Ranch Contract · Texas Comptroller of Public Accounts form 50-129 · Figures verified August 2026. The three-year and 40-acre arithmetic above is illustrative and is not a quote for any tract.

County appraisal districts set their own degree-of-intensity and acreage standards. Confirm current requirements with the appraisal district for the county your land sits in before you rely on anything here. This is general information, not tax or legal advice.

If a tract you are buying or selling in North Texas carries ag valuation, the rollback question belongs in the contract, not in a phone call after closing. Call us and we will get it in writing. Start at Texas Land & Ranch.

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