What counts as a hobby farm in Virginia?
Nothing, as a legal category. Virginia law has no hobby farm class; the label runs into two separate tests. Where a county offers land use taxation, the Commissioner of the Revenue checks the land against state standards such as bona fide production for sale. For federal income tax, the IRS asks whether the activity is pursued for profit or for enjoyment, which is a tax adviser's question.
Hobby farm is a way of talking, not a class in Virginia law
People use the phrase for a small place kept mostly for enjoyment rather than income. Virginia law has no hobby farm class to match it. What the phrase actually runs into are two separate tests, run by two separate offices, and a property can pass one and fail the other.
The Census of Agriculture has its own definition for counting: a farm is any place, urban or rural, that produced and sold, or normally would have sold, $1,000 or more of agricultural products during the census year. That is a statistical definition. It does not decide whether a Virginia county taxes the land as farmland, and it does not decide the federal income tax question.
Locally, the Commissioner of the Revenue tests production for sale
A county, city or town that has adopted a land-use plan may adopt an ordinance providing for use value assessment, which is how Virginia's land use program carries qualifying farmland. Getting in turns on how the land is used, not on whether the owner enjoys the place.
- The real estate must meet all of the state's standards to qualify for agricultural or horticultural use, not most of them.
- The applicant certifies that the land currently meets one or more of seven listed requirements, among them bona fide production for sale of plants or animals useful to man, and being devoted to and meeting the requirements for payments under a soil and water conservation program agreement with a state or federal agency.
- Before assessing, the local officer must find that land devoted solely to agricultural or horticultural use is at least five acres, and forest use at least 20 acres. A governing body may set a smaller minimum by ordinance for agricultural purposes, aquaculture or specialty crops.
- Livestock, dairy and poultry land needs at least 12 animal unit-months of commercial livestock or poultry per five acres of open land in the previous year. One animal unit is one cow, one horse, five sheep, five swine, 100 chickens, 66 turkeys or 100 other fowl.
Acreage alone does not settle any of that, and neither does how the owner feels about the place. The livestock standard is counted against open land, so the acres in pasture and the commercial animals actually on them are part of the arithmetic. Whether a specific parcel meets the standards is the Commissioner of the Revenue's decision.
Three county pages spell out where horses and sales fall
The state standards apply wherever the program runs. Three county pages in this footprint also say, in their own words, how horses kept for pleasure and a farm with no sales are treated.
| County | What its own page says |
|---|---|
| Wythe | Participates only in the agricultural and horticultural portions, and applicants certify the income earned from that use. Boarding, training and breeding of horses may qualify; horses for the owner's personal use do not, and all five acres must be devoted to the qualifying use. |
| Pulaski | A family owned farm with no sales does not qualify. Minimums are five acres for agriculture and 20 for forestry. |
| Montgomery | Requires 5 acres of cleared land for agricultural or horticultural use and 20 for forest. Horses maintained exclusively for recreational purposes do not qualify the land. House sites are excluded and assessed at fair market value, though an owner may furnish evidence to qualify the house site of a true tenant house. |
Before assuming the program applies at all, check which counties here have land use taxation. The application window is its own subject at when the land use application is due, and the fuller mechanics, including the rollback taxes that can follow a later change in use, are in the land use program explained.
Federally, the IRS asks about profit intent, not acreage
The federal hobby-versus-business question is separate from any county's land use program. The IRS describes a hobby as an activity a person pursues because they enjoy it and with no intention of making a profit, and says people operate a business with the intention of making a profit.
The IRS lists factors for telling the two apart and says all factors, facts and circumstances must be considered, with no one factor more important than another. The page carrying that guidance is marked as an archival document that may not reflect current law, so how it applies to a specific return is a tax adviser's call.
Selling a small farm raises a separate tax question, covered in do I pay capital gains when I sell land.
Wondering whether a small farm here is taxed as a farm?
Send the county, the acreage and what the land produces or is used for. Lowell will talk through how that use looks to a buyer, while the tax classification stays the Commissioner of the Revenue's call. No cost, no obligation.
Got it. Thank you.
We'll be in touch shortly with an honest read.
Questions this raises
Does keeping horses only for personal riding disqualify land from land use taxation?
In Wythe and Montgomery counties, by their own published terms, yes. Wythe says horses for the personal use of the owner do not qualify, though boarding, training and breeding of horses may; Montgomery says horses maintained exclusively for recreational purposes do not qualify the land. Elsewhere in this footprint, the county's Commissioner of the Revenue answers it.
Does a farm need five years of history before it can qualify for land use taxation?
No prior-use period appears in the current state standards for agricultural or horticultural use. What they require is that the land currently meet the standards, including bona fide production for sale. Some older published guidance still describes a prior-use period, so the county's Commissioner of the Revenue is the office to confirm with.
What records help show a county that land is farmed for sale?
The state standards let the Commissioner of the Revenue or local assessing officer require documentation of what the applicant certifies, and name documents the officer may find useful: the USDA Farm Service Agency farm number with evidence of taking part in a federal farm program, federal farm tax forms 1040F, 4835 or 1040E, or a conservation farm management plan prepared by a professional. Which records a county asks for is that office's call.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- 2022 Census of Agriculture, frequently asked questions USDA National Agricultural Statistics Service
- 2VAC5-20, standards for classifying real estate as devoted to agricultural or horticultural use Virginia Administrative Code
- Va. Code 58.1-3231, use value assessment ordinances Virginia General Assembly
- Va. Code 58.1-3233, minimum acreage for special classifications of real estate Virginia General Assembly
- Frequently asked questions: land use assessment Wythe County, Virginia
- Land Use Value FAQ (PDF) Pulaski County, Virginia
- Commissioner of Revenue: land use information Montgomery County, Virginia
- Here's how to tell the difference between a hobby and a business for tax purposes Internal Revenue Service