IRS Issued Guidance on Farmland Sale Tax Deferrals
The federal government updated tax deferral rules for qualifying agricultural land transactions.
Updated on Oct. 9, 2026 in Agriculture
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The IRS has released new guidance clarifying tax deferral requirements for the sale of farmland. Sellers may now utilize these provisions provided they meet strict duration requirements for both prior ownership and continued farming by the buyer.
Why it matters
This updated guidance clarifies how agricultural sellers can manage their tax liability during installment sales. By defining the operational criteria for these transactions, the IRS provides a clearer pathway for farmers to access potential tax savings.
Eligible farmland must have been farmed for at least 10 years by the seller, with the buyer required to farm it for another 10 years. Sellers can achieve estimated tax savings of 7.5% at a 5% return, with potential increases to 9% for higher returns.
The players
Internal Revenue Service
The United States federal agency responsible for tax collection and the enforcement of the federal tax code.
The details
Under the new rules, tax deferrals are restricted exclusively to the first year of an installment sale, requiring taxes to be paid as subsequent payments are collected. The guidance also allows for fallow periods consistent with standard agricultural practices and confirms that estates and trusts qualify as pass-through entities.
Timeline
10 years is the minimum duration of prior farming required for eligibility.
10 years is the required duration for the buyer to continue farming the property.
Market Landscape
This move updates the implementation of the Internal Revenue Code installment sale provisions. It restricts the flexibility previously enjoyed by land sellers and brings agricultural transactions into closer alignment with standard federal tax collection timelines.
Farmers planning to sell land must now ensure their buyers commit to long-term agricultural use to qualify for these tax deferrals. Sellers should also prepare to pay taxes on installment payments immediately following the initial year of the transaction.
The takeaway
Sellers should consult with tax professionals to determine if their land and buyer profile meet the new 10-year usage thresholds. Failure to align with these federal requirements will result in the loss of tax deferral eligibility after the first year of an installment sale.
Further reading
For broader insights on farming regulations, see our Agriculture section.
Source note: This article includes information reported by RFD-TV.
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Do current tax deferral rules sufficiently support the long-term viability of family farms?
