The US Treasury and IRS have proposed regulations allowing sellers of qualifying farmland to spread tax payments over four years when the land is sold to an active farmer, reducing the upfront tax burden and supporting continued agricultural use.
The Department of the Treasury and the Internal Revenue Service (IRS) announced on 28 September 2026 that it unveiled proposed regulations that allow sellers of qualifying farmland to spread their tax payments across four years instead of paying the full amount upfront.
Section 1062 of the Internal Revenue Code authorises this election for sales or exchanges of farmland that occur in tax years beginning after 4 July 2025. The measure aims to reduce the financial burden on farmers who sell their land to active farmers.
IRS Chief Executive Officer Frank J. Bisignano stated that the regulations provide practical relief. “Farmers should have options when farmland is sold,” he said. “The Working Families Tax Cuts helps keep farmland in agricultural use by spreading tax payments over four years.”
What makes farmland eligible
The farmland must meet several conditions. The property must be real property located in the United States. It must have been used for farming during substantially all of the 10 years before the sale, or leased to a qualified farmer for that purpose.
The buyer must be an individual actively engaged in farming. Additionally, the property must become subject to a legal restriction preventing non-agricultural use for 10 years after the sale.
How the payment structure works
Taxpayers elect to pay 25% of their tax liability each year over four years. The first payment is due on the regular federal income tax return due date for the year of sale, without regard to filing extensions. Each remaining payment follows on the regular return due date of the following three tax years.
Coverage for pass-through entities
The proposed rules address sales by partnerships, S corporations, trusts, and estates. Partners and shareholders generally make their own elections regarding their share of the gain. When gain passes through a trust or estate to a beneficiary, similar rules apply.
The regulations also clarify how taxpayers satisfy the 10-year farming requirement when land is temporarily removed from production under government programs, when recognised farming practices require it, or when circumstances beyond the taxpayer’s control intervene.
