The Treasury Department and Internal Revenue Service on September 28 issued proposed regulations that would allow farmers selling land to spread their tax payments over four years instead of paying in full upon the sale.
Under Section 1062 of the Internal Revenue Code, eligible taxpayers who sell or exchange qualifying farmland to qualified farmers can elect to pay taxes on the gain in four equal annual installments, according to the IRS. The election applies to sales and exchanges made in taxable years beginning after July 4, 2025.
To qualify, the farmland must be real property located in the United States that was used for farming purposes — or leased to a qualified farmer for farming — during substantially all of the 10 years before the sale. The property must also be subject to a legally enforceable restriction preventing its use for anything other than farming for 10 years after the sale. The buyer must be an individual actively engaged in farming, the IRS said.
Taxpayers making the election would pay 25 percent of their tax liability with each annual installment payment. The first payment would generally be due on the regular tax return due date for the year of the sale, while remaining payments would be due on the same date for the following years. Similar rules would apply to sales by partnerships, S corporations, trusts, and estates, according to the agency.
The IRS is requesting comments on the proposed regulations by November 30, 2026.