When it comes time to sell farmland, taxes are one of the first concerns for producers. The recent One Big Beautiful Bill Act (OBBBA) has introduced an important change that could make a significant difference. Many farmers are now asking, “Can I defer the tax on selling farmland?” The answer, for many, is yes.
Understanding Section 1062
The OBBBA created a new code section, 1062, that gives eligible farmers the ability to defer paying capital gains tax when selling farmland to another active farmer. Instead of paying the entire tax in one year, the seller can elect to spread payments out over four annual installments. This election can help smooth cash flow and reduce the immediate financial burden that often comes with selling land.
Who Qualifies
To qualify, the farmland must be sold to a buyer who is actively engaged in farming and agrees in writing to continue farming the property for at least ten years. This ensures that farmland remains in agricultural production while supporting both the retiring farmer and the next generation.
How the Deferral Works
If you are wondering again, “Can I defer the tax on selling farmland?”, here’s how it works. Once the sale is complete, the seller may elect to pay the tax in four equal payments due each April 15. However, if any payment is missed, the remaining balance becomes immediately due. This structure provides flexibility, but it also requires careful planning and follow-through.
The Bottom Line
This new provision offers a valuable opportunity for succession planning and retirement transitions. Farmers considering a sale should consult their tax professional to determine if it’s the right fit.
At AgQuest Financial, we’re ready to support your financing needs for buying or selling farmland. When you’re prepared to move forward, give us a call—we’ll help make your transaction happen.