IRS proposes farmland installment tax payment regulations

Taxpayers who sell or exchange qualified farmland to active farmers can elect, under proposed regulations from Treasury and the IRS, to pay the tax on the gain in four annual installments.

Section 1062 of the Internal Revenue Code allows eligible taxpayers to spread payment of the tax attributable to gain from certain sales or exchanges of farmland over four years.

The election applies to qualified sales or exchanges made in taxable years beginning after July 4, 2025 — the day the One Big Beautiful Bill Act was signed by President Donald Trump.

To qualify, the farmland must be real property located in the U.S. that was generally used by the taxpayer for farming purposes, or leased to a qualified farmer for farming purposes, during substantially all of the 10 years before the sale or exchange.

The property must also be subject to a legally enforceable restriction that generally prevents it from being used for anything other than farming for 10 years after the sale or exchange. In addition, the buyer must be an individual who is actively engaged in farming. Read more.