Deferring Tax Payments on the Sale of Farmland

July 2026
By Larissa Zeiler
CPA, Leffel, Otis & Warwick, P.S.

The One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025, created a new election that allows qualified sellers of farmland to pay the tax on the gain related to the sale of farmland in four equal installments, instead of all in the tax year of the sale.  The farmland must meet the following qualifications:

1. 1. Must be farmed by or leased to a qualified farmer for a period of 10 years prior to the date of the sale.
   2. Must continue to be used for farming 10 years after the date of the sale.

Example: Jim sells land in 2026 for a $500,000 gain and owes $100,000 tax on the gain.  He may pay this in full on 4/15/27, or may elect to pay $25,000 on that date, then $25,000 by April 15, 2028, 2029, and 2030. 

The provision is effective for land sales occurring in tax years beginning after July 4, 2025.  For most taxpayers, this is the 2026 calendar year.  The first installment is due with the original due date of the tax return (April 15^th), so if you are considering selling land in 2026, be sure to communicate this to your CPA prior to the April 15, 2027, filing deadline.  The election is also available to corporations and partners of pass-through entities such as LLCs and S-corporations. 

It is important to note that the election to defer the tax is different from an installment sale, which spreads the gain out over the life of the contract.  This election merely spreads the calculated tax over 4 years, allowing taxpayers to hold on to their money longer.