The Internal Revenue Service and the Treasury Department
Section 1062 of the Tax Code allows eligible taxpayers to spread payment of the tax attributable to gain from certain sales or exchanges of farmland over four years. The election applies to qualified sales or exchanges made in taxable years starting after July 4, 2025.
"Farmers should have practical options when farmland is sold," said IRS CEO Frank Bisignano in a statement Monday. "The Working Families Tax Cuts helps keep farmland in agricultural use by allowing eligible sellers to spread their tax payments over four years when qualifying property is sold to active farmers."
To qualify, the farmland has to be real property located in the U.S. that was generally used by the taxpayer for farming purposes, or leased to a qualified farmer for farming purposes, during substantially all of the 10 years before the sale or exchange. The property also must be subject to a legally enforceable restriction that generally prevents it from being used for anything other than farming for 10 years after the sale or exchange. In addition, the buyer must be an individual who is actively engaged in farming.
Taxpayers who make the election would pay 25% of the applicable tax liability with each of four annual installment payments.
The first payment would generally be due on the regular due date of the taxpayer's federal income tax return, without regard to extensions, for the year of the sale or exchange. Each remaining payment would typically be due on the regular return due date for the following tax year.
The proposed rules also address sales or exchanges by partnerships, S corporations, trusts and estates. In the case of a sale by a partnership or S corporation, partners and shareholders generally would make their own elections with respect to their share of the gain. Similar rules would apply when the gain passes through a trust or estate to a beneficiary.
The proposed regulations also detail how taxpayers can satisfy the prior 10-year farming-use requirement in certain circumstances, including when farmland is temporarily taken out of production under a government program, as part of recognized farming practices or because of events outside the taxpayer's control.
The Treasury and the IRS are asking for written or electronic comments on the proposed regulations by Nov. 30, 2026, as per the instructions in the proposed regulations.
