New Tax Break for Farmland Sales: What’s in the “One Big Beautiful Bill Act” for Farmers?

If you're a farmer, landowner, or just someone with an eye on rural tax policy, there's something in the recently passed One Big Beautiful Bill Act (OBBBA) that might interest you.

One of the lesser-known—but potentially impactful—provisions of the bill is Section 70437, which introduces a new tax option for people selling farmland to other farmers.

In short, if you qualify, you can spread your capital gains tax bill over four years instead of paying it all at once.

Here's a quick breakdown of what this means—and who might benefit.

What’s This All About?

Selling farmland usually comes with a significant capital gains tax hit. Under current law, you typically owe taxes on the profit the year you sell, which can be tough—especially for farmers retiring or transitioning out of agriculture.

Section 70437 of the OBBBA changes that. If you sell certain farmland to another farmer, you can choose to pay that tax in four equal annual installments.

It’s a way to reduce the immediate tax burden while helping farmland stay in agricultural use.

Who Can Use It?

To take advantage of this new rule, both the land and the buyer need to meet specific criteria:

✅ Qualified Farmland

• The property must be in the United States.

• It must have been used as a farm or leased to a farmer for most of the past 10 years.

• It must be under a legal restriction (like a covenant) that keeps it in farming for at least 10 more years after the sale.

  
  

✅ Qualified Farmer

• The buyer must be actively engaged in farming, according to USDA definitions—not just a land investor or ag company.

  
  

How the Tax Installments Work

If you meet the requirements and choose this option:

• You calculate your “applicable net tax liability”—that’s the portion of your income tax that comes directly from the gain on the farmland sale.

• Then, instead of paying it all at once, you split it into four equal annual payments.

  
  

⚠️ A Few Catches:

• If you miss a payment, the rest becomes due immediately.

• If you're an individual and you pass away, or if a corporate seller closes or liquidates, the rest of the payments may be accelerated too.

• If a business buyer takes over your assets and agrees to take on the installment liability, the payments can continue normally.

  
  

Filing Requirements

To use the installment option, you must:

• Elect it on your tax return (filed by the standard due date—no extensions).

• Include documentation showing the land is under the required farming-use restriction.

  
  

And if the seller is a partnership or S corporation, the election must be made by each individual partner or shareholder.

Why It Matters

This isn’t just a tax perk—it's a strategic move. The provision is designed to:

• Ease the financial burden on retiring or transitioning farmers,

• Encourage land sales to active farmers rather than developers or corporate buyers, and

• Preserve farmland for the long haul.

  
  

It’s one of several rural-friendly pieces tucked into the sprawling One Big Beautiful Bill Act, which includes a wide range of tax and economic policies.

Is This Right for You?

If you're planning to sell farmland and want to make sure it stays in the hands of farmers, this could be a smart tool to consider—especially if the capital gains would otherwise create a steep one-year tax bill.

But like anything tax-related, the rules are technical. Talk to a tax professional or estate planner before making any moves. You’ll want to ensure the land qualifies, the buyer meets the definition, and the proper steps are taken during the sale.

Bottom Line

The One Big Beautiful Bill Act may be packed with big headlines, but Section 70437 could quietly make a meaningful difference for family farms and rural communities. It’s not flashy, but for those selling farmland, it could be a practical way to reduce taxes, support new farmers, and protect the future of agriculture.

The information provided in this blog post is intended for general informational purposes only and should not be construed as legal or tax advice. While every effort has been made to ensure the accuracy of the information, tax laws and regulations are subject to change, and individual circumstances may vary. For personalized advice and to ensure compliance with current tax laws, it is strongly recommended that you consult with a qualified tax professional, financial advisor, or legal counsel. The author and publisher of this blog assume no responsibility for any errors or omissions, or for any actions taken based on the information contained herein.