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Farm Taxes in 2026: What Changed After the 2025 Tax Breaks Were Set to Expire

The USDA’s 2024 estimates described a pre-enactment scenario, not farmers’ actual 2026 tax bills. Congress changed key provisions in July 2025; current outcomes depend on each farm’s circumstances.
From TheFinanceBase Team6 min to read

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Not necessarily. The USDA’s widely cited estimates of higher farm tax bills were projections of what could happen if specified 2017 tax-law provisions expired after 2025. Congress enacted P.L. 119-21 on July 4, 2025, changing provisions central to that scenario. The USDA estimates therefore are not forecasts of farmers’ actual 2026 tax bills. Individual outcomes depend on income, family circumstances, farm structure, property and elections.

What the USDA projected—and what it did not

In March 2024, the USDA Economic Research Service (ERS) analyzed a counterfactual: what farm households might owe if selected individual-income and estate-tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expired as then scheduled at the end of 2025. The figures below are model estimates, not observed 2026 tax-return results.

ERS used its Federal Income Tax model for income-tax provisions and an actuarial Estate Tax model for estate-tax effects. Its analysis drew substantially on Agricultural Resource Management Survey farm data from 2018–2021. The results describe the scenario ERS modeled before the later law change; they do not calculate the effects of P.L. 119-21 on farm households.

Which farm households faced the largest modeled increases?

The answer depends on whether “largest” means dollars or percentage of liability. ERS grouped farms by gross cash farm income (GCFI); the categories below are the definitions used in its analysis. Retirement and off-farm occupation farms are occupation categories, while the sales categories are based on GCFI.

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Farm category ERS definition Modeled effect from higher rates and related changes
Retirement or off-farm occupation Under $350,000 GCFI Off-farm occupation farms had the lowest reported percentage increase in the QBI-expiration scenario: 4%. ERS did not state a separate rate-change figure for this occupation category in the cited estimate.
Low-sales Under $150,000 GCFI In the QBI-expiration scenario, modeled liability rose by an average of $711 per farm household.
Moderate-sales $150,000–$349,999 GCFI Largest percentage increase from rate-related changes: 15.6%. The QBI-expiration scenario produced the highest reported percentage increase among farm types, 20%.
Midsize $350,000–$999,999 GCFI ERS did not state a separate figure for this category in the cited estimates.
Large $1 million–$4,999,999 GCFI ERS did not state a separate figure for this category in the cited estimates.
Very large At least $5 million GCFI Largest dollar increase from rate-related changes: $27,588 per farm household, or 5.4%. In the QBI-expiration scenario, modeled liability rose by $87,219.

These are ERS’s 2024 estimates under its pre-enactment scenario. The rate-related results illustrate why dollar and percentage comparisons differ: very large farms had the largest modeled dollar increase, while moderate-sales farms had the largest percentage increase. The figures are averages for modeled groups, not amounts that every farm in a category would owe.

How the old expiration scenario affected each tax provision

Provision ERS examined What ERS modeled under expiration What to take from the estimate
Individual income-tax rates and related provisions Average increase of $2,263 per farm household, or 11.5%. ERS found this group of changes produced the largest total modeled effect.
Qualified business income (QBI) deduction 45.3% of farm households received the deduction. Among recipients, it was associated with an average $2,464 lower tax liability. In the expiration scenario, increases ranged from $711 for low-sales farms to $87,219 for very large farms; the percentage increase ranged from 4% for off-farm occupation farms to 20% for moderate-sales farms. The effect depended on whether a household received the deduction and on its circumstances; the average among recipients is not a universal tax saving.
Child Tax Credit (CTC) ERS projected the share of farm households receiving the credit would fall from 35.9% to 26.8%. The average credit among eligible farm households was projected to decline from $3,770 to $1,331. The dollar amounts are adjusted to 2021 values. ERS’s baseline excludes the American Rescue Plan Act expansion, which had expired in 2022.
Alternative minimum tax (AMT) ERS modeled wider exposure under the specified expiration scenario. The aggregate effect was more limited than the rate, QBI and CTC effects; exposure generally concerned higher-income households.
Bonus depreciation ERS considered the effect of reduced bonus depreciation under the scheduled-expiration assumptions. The modeled aggregate effect was more limited. Later legislation changed depreciation rules for certain qualifying property; eligibility and timing matter.
Estate-tax exemption Under its old-law counterfactual, ERS compared an assumed $13.95 million exemption with $6.98 million. It estimated the share of farm estates owing federal estate tax would rise from 0.3% to 1.0%, and total tax for taxable farm estates would rise from $572 million to $1.2 billion in 2026. The projection assumed real annual asset growth of 2.5%. Those exemption figures are assumptions in the 2024 scenario, not current thresholds. The estimated exposure was concentrated among larger estates.

ERS reported the largest total modeled effects from individual income-tax rates and related provisions, the QBI deduction, and the expanded CTC. The AMT, depreciation and estate-tax changes had more limited aggregate effects in its analysis, although they could matter substantially to an affected household or estate.

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Why the 2024 estimates are not a 2026 tax forecast

Congress enacted P.L. 119-21 on July 4, 2025, before the scheduled expiration date. IRS materials describe changes to provisions central to ERS’s earlier scenario, including the QBI deduction and estate-tax exclusion, and restore 100% special depreciation for certain qualifying property. As a result, the scheduled-expiration assumptions cannot be carried forward as if they were the law governing every 2026 return.

The available IRS implementation material and the enacted law establish that the rules changed, but they do not supply a replacement ERS estimate of the net effect on farm-household tax liability. It would be misleading to use ERS’s 2024 average increase as a prediction that farmers’ taxes will rise by that amount—or to conclude from the legislative changes alone that every farmer’s taxes will fall. A farm’s result can depend on taxable income, filing status, household and estate circumstances, business organization, eligible investments, and the timing and use of elections.

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Depreciation: check the property and acquisition dates

The IRS’s 2025 Farmer’s Tax Guide says 100% special depreciation is restored for certain qualified property acquired and placed in service after January 19, 2025. The IRS also describes an election for qualifying production property placed in service after July 4, 2025, and before January 1, 2031, subject to statutory requirements.

That does not mean every farm purchase qualifies for immediate full expensing. Property acquired before January 20, 2025, or placed in service from January 1 through January 19, 2025, can remain subject to the earlier phase-down rules. The type of property, acquisition date, placed-in-service date, applicable election and statutory exceptions all matter. Farmers considering a major purchase should have a tax professional check the applicable rules for that asset and tax year.

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Qualifying farmland sales: a new four-installment election

For tax years beginning after July 4, 2025, an eligible taxpayer may elect to pay the net income tax attributable to gain from a qualifying sale or exchange of farmland in four equal annual installments. This rule concerns the timing of tax payments on qualifying gain; it is not a general installment option for every farm sale.

  • The property must be U.S. real estate used by the seller as a farm, or leased to a qualified farmer for farming, during substantially all of the preceding 10-year period.
  • The property must be sold to a qualified farmer and subject to a covenant restricting its use to farming for 10 years after the sale. The IRS describes a qualified farmer as an individual actively engaged in farming under the applicable statutory standard.
  • The election requires Form 1062, a Schedule A for each sale, and the required covenant. The forms must be attached to the return by its due date, including extensions.
  • For a partnership or S corporation, the entity passes information to partners or shareholders; the owners make the elections at their level.

Because the requirements include both the buyer’s status and the land’s past and future use, a seller should confirm eligibility and filing steps before relying on the four-installment treatment. The IRS’s December 2025 Instructions for Form 1062 provide the implementation details.

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What a farmer should check before estimating a 2026 bill

Use the old ERS estimates to understand which tax provisions could matter, not to calculate a current liability. For a practical estimate, gather the information that determines whether the changed or continuing rules apply:

  • Review projected taxable income, filing status, household dependents and any QBI deduction eligibility.
  • For planned equipment or production-property purchases, verify the asset classification, acquisition and placed-in-service dates, and available elections.
  • For a farmland sale, check the ownership and use history, buyer qualifications, covenant requirements and Form 1062 deadlines.
  • For estate planning, use current law and current estate values rather than the exemption amounts assumed in ERS’s 2024 counterfactual.
  • Ask a tax professional to model the farm’s own facts. ERS’s household averages do not account for every farm organization, family situation or tax election.

The USDA’s March 2024 analysis remains useful for showing how a particular set of expirations might have affected different farm households. It does not establish what a specific farmer owes under the law now in effect.

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