
New tax law boosts agriculture with permanent deductions, estate tax protections, and enhanced farm bill provisions.
The Trump administration signed its first expansive piece of legislation, making permanent much of the legislation originally included in the Tax Cuts and Jobs Act of 2017 (TCJA).
For a comprehensive overview of the tax provisions in the One Big Beautiful Bill Act (OBBBA), see our full summary of the tax bill and what it could mean for your tax strategy.
As a follow-up to our previous blog, we’re reviewing updates most relevant to the ag industry.
Tax bill provisions of particular interest to agribusiness
Depreciation
Machine sheds, tile, and farm equipment purchased after January 19, 2025, are now 100% deductible at the federal level utilizing bonus depreciation and the Section 179 limit more than doubles to $2.5 million.
As farm equipment has continued to increase in cost, this increased limit may allow producers to dial in their proposed taxable income, avoiding bonus depreciation and some of the state ramifications of using it.
Qualified Business Income Deduction (QBID)
QBID is by far the most valuable of the provisions passed — and at the same time is perhaps the least well known in the production ag community.
In its simplest form, QBID allows a deduction of up to 20% of business income.
Assume a married taxpayer’s Schedule F has a profit of $200,000 and they have no other income in a given tax year. They would receive an additional deduction of $40,000, resulting in taxable income of only $160,000.
This deduction is powerful because the new tax law makes it permanent. QBID does not come back to hurt taxpayers in later years and is essentially free taxable income available to business owners.
The cooperative industry may also greatly benefit from the permanency of Section 199A and will continue to be able to pass through any excess deductions to its membership for deduction on individual income tax returns.
Estate tax implications
There has been some confusion in this area, as several producers have told us the estate tax was eliminated, even though the president explicitly stated in a speech in Iowa after passage, the estate tax has not been eliminated. The exemptions will remain at slightly higher than current levels and will not revert back to pre-TJCA.
Capital gains
The law adds a provision for those selling farmland to other eligible actively engaged farmers and allows the capital gains on that sale to be paid over four annual installments.
Qualified farmland includes land used by the taxpayer as a farm or leased by the taxpayer to a qualifying farmer during substantially all of the 10-year period ending on the date of the sale. The sale is also subject to a covenant that prohibits the use of the property as anything but a farm for a 10-year period. While this provision doesn’t change the calculation of tax, it does ease the payment burden.
In addition, it requires acceleration of the payments in certain circumstances, such as death of the selling farmer.
Energy provisions
Solar and wind investments have become very pronounced in rural America in recent years. OBBBA terminates many of the clean energy production and investment credits for wind and solar facilities, starting with projects that begin construction twelve months after the date of enactment and are placed in service after December 31, 2027.
If you are currently being solicited to option your acres, be sure to address these concerns regarding feasibility and clean-up of structures should these investments become less profitable for the investor.
Farm bill provisions
OBBBA includes provisions that increase reference prices for farm commodities and allows farmers enrolled in agriculture risk and coverage (ARC) programs to purchase supplemental coverage from the federal crop insurance program.
Farmers no longer have to make a choice between ARC and price and yield protection, which was often just a best-guess pick. The new law will give producers the higher benefit, and no election is required for 2025.
An election is required for 2026, and if not made the producer will not get a payment. However, for 2027 – 2031, the election will default back to the type of payment received for the 2025 crop year.
Perhaps the biggest benefit is the increase in payment limitation from $125,000 to $155,000 per individual. In addition, LLCs and S corporations will now be treated as general partnerships for payment limitation purposes.
Historically, these entities received only one limit. This provision provides for each owner to have their own limit.
How CLA can help
TJCA’s expiration was a significant concern in the industry. It’s reassuring to know that tax planning season will no longer be a moving target with tax legislation in flux.
We’ll keep you posted as to further policy developments. Meanwhile, you can check out our upcoming webinars and on-demand recordings to learn tax planning strategies to help you be prepared no matter where tax policy lands.