As harvest wraps up and the holidays draw near, it is a good time to shift gears and look ahead. The decisions you make now could have a big impact on your farm’s bottom line in the future.
One area that deserves attention is taxes. They are a key part of managing profitability, and the One Big Beautiful Bill Act, signed into law July 4, has major tax changes which farm managers will definitely need to know.
This sweeping law includes hundreds of provisions, but several stand out for farm businesses. From estate planning to depreciation rules and new reporting requirements, these changes could influence everything from year-end purchases to long-term succession plans.
Today, I would like to share some of the key provisions that directly impact farm operations.
Farm transition and estate planning
One major change involves estate planning. The federal estate and gift tax exemption was scheduled to drop from $13.99 million to $7 million per person at the end of 2025. The OBBBA permanently increased the exemption to $15 million per person starting in 2026, with annual adjustments for inflation. This is significant for farm families concerned about passing land and assets to the next generation.
Another important provision affects farmland sales. The OBBBA creates a new election for sellers who transfer farmland to a qualified farmer. Instead of paying tax on the gain all at once, sellers can choose to spread the tax over four equal installments. To qualify, the land must have been farmed or leased to a qualified farmer for at least 10 years prior to the sale, and the property must remain restricted to farming for 10 years after the transfer. This option applies to sales occurring in tax years beginning after July 4.
Qualified Business Income Deduction
The QBID deduction is now permanent. Farmers operating as sole proprietors or through pass-through entities can continue to claim the 20% deduction under I.R.C. §199A, including the special deduction for agricultural cooperatives and their patrons. Starting in 2026, eligible taxpayers who participate in a qualified trade or business and have at least $1,000 in QBI are guaranteed a minimum deduction of $400, even if the standard calculation yields a lower amount. Both will be indexed for inflation after 2026.
Accelerated depreciation
Depreciation rules also saw changes from OBBBA. Bonus depreciation, which was set to phase out by 2027, is restored to 100% for property acquired after Jan. 19, 2025. Businesses may also elect to use 40% instead of the full amount.
In addition, the Section 179 deduction limit increases from $1 million to $2.5 million, with the phase-out threshold rising from $2.5 million to $4 million. These amounts will also be indexed for inflation after 2025.
Qualified Production Property
The OBBBA also introduces a new category of assets, known as qualified production property. The act allows 100% bonus depreciation on the manufacturing-use portion of nonresidential real property that would normally be depreciated over 39 years.
For farms, QPP could include seed cleaning facilities, feed mills, fruit and vegetable packing houses, meat processing facilities, maple syrup processing buildings and honey extraction and bottling facilities.
1099-MISC and 1099-NEC
Reporting requirements are also changing. Beginning in 2026, the threshold for filing 1099-MISC and 1099-NEC forms increases to $2,000 per payee, with annual inflation adjustments starting in 2027. It should be emphasized that the current reporting threshold of $600 per payee remains in effect for the 2025 tax year. Copies of the Form 1099-NEC or 1099-MISC must be provided to payees by January 31, 2026.
Consult a professional
These changes are complex, and every farm is different. It is important to consult with your tax professional to understand how these provisions affect your operation.
For more details, check out the 2025 Farmers Tax Guide at www.irs.gov/pub/irs-pdf/p225.pdf and visit the Farm Office Blog at farmoffice.osu.edu/blog.
Thanksgiving
I hope each of you have a wonderful Thanksgiving holiday, and I would like to share a quote from Oliver Wendell Holmes who stated, “I hate paying taxes. But I love the civilization they give me.”
Have a good and safe day!
