Big Beautiful Bill Series: Tax Policy Shifts for Farmers 

 Learn about new tax policy changes to help you plan, invest, and preserve your farm. 

After several years of limbo, tax policy for farmers may finally become a little easier (or at least clearer). The first major legislative action under the Trump administration cements many provisions from the 2017 Tax Cuts and Jobs Act (TCJA), providing more permanence and predictability for ag producers and small business owners navigating tax policy updates. 

Without a doubt, the expiration of TCJA was a concern for many in the industry at the end of 2024. With its key elements now extended under the ‘One Big Beautiful Bill Act’ (OBBBA), farmers can begin to plan for the long term without second-guessing major tax policy reversals. 

In the second part of our three-part series on the ‘One Big Beautiful Bill Act’ and what it means for U.S. agriculture, we dive into tax policy updates that could affect landowners and how to stay ahead of them. 

Disclaimer: This material has been prepared by AgAmerica Lending for informational purposes only and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisers prior to filing your tax return. 

Tax Policy Updates Farmers Should Know 

The ‘One Big Beautiful Bill Act’ includes key updates that impact agricultural producers when it comes to estate planning, equipment expensing, and incentives for biofuels and small business owners. 

“Important tax provisions will also help farmers save money that can be used to pay bills, invest in new technologies, and pass the family farm to the next generation.”

– Zippy Duvall, President, American Farm Bureau Federation 

Estate Tax and Stepped-Up Basis 

One of the most significant changes to tax policy landowners should be aware of is the permanent increase in the federal estate tax exemption. Starting in 2026, the exemption will increase from $13.99 million to $15 million per individual (or from $27.98 million to $30 million per couple) and be adjusted annually for inflation using the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). 

The stepped-up basis—a tax policy provision that was at risk not too long ago—is now preserved permanently. This provision allows heirs to reset the cost basis of inherited assets to their fair market value at the time of the owner’s death, which can significantly reduce capital gains taxes if the assets and land are sold. 

The bill also introduces a capital gains installment option for eligible farmland sales. This means that if you sell qualified farmland to another actively engaged farmer, you can now spread capital gains payments over four years. 

Pro Tip: Producers should review their balance sheets and entity documents to assess fair market value and consider state-specific estate tax thresholds, particularly in the Northeast, where limits tend to be lower. 

Small Business Deductions and Expensing Limits 

Farmers operating under pass-through entities such as LLCs and S-Corps will benefit from a permanent 20 percent Qualified Business Income Deduction (QBID)—a valuable but often overlooked tax break in production agriculture. 

In addition, the Section 179 expensing limit has increased from $1.22 million to $2.5 million, allowing producers to deduct the full cost of eligible equipment and property in the year it’s placed in service rather than depreciating it over time. In addition to the Section 179 expensing limit, Bonus Depreciation was restored to 100 percent and made permanent for purchases made after January 19, 2025. 

To give you context, say a farmer buys $2.8 million worth of tractors and irrigation equipment in 2025. Instead of spreading the full $2.5MM deduction over several years, they opt to fully expense the entire amount that year. This can offer strong tax advantages, especially if the equipment is paid for with cash. Just keep in mind if you elect this option and finance equipment, there would be no remaining depreciation deductions to offset future loan principal payments. 

Property eligible for Section 179 expensing includes farm equipment, machine sheds, tiling, and nonresidential buildings used directly in farming operations—such as barns, grain bins, greenhouses, chemical storage facilities, and dairy parlors. 

Biofuels and Clean Energy Incentives 

The updated legislation renews and modifies the 45Z Clean Fuels Production Credit through 2029, but with a domestic-first twist. Only fuels made from feedstocks grown in the U.S., Canada, or Mexico now qualify—effectively excluding imports like used cooking oil from China and tightening the eligibility criteria. 

Producers working with animal manure will also benefit from a new emissions-based rate, recognizing differences across feedstock types. 

“The 45Z credit will unlock billions in rural investment.”

– Emily Skor, CEO, Growth Energy 

However, the bill phases out many solar and wind credits beginning in 2027, including investment incentives for new projects started 12 months after the bill’s enactment. 

Other Tax Policy Updates Farm Operators and Investors Should Know 

• Paid Family and Medical Leave Credit is now permanent. Employers offering paid leave can claim a credit on qualifying wages under IRC 45S. 
• New Markets Tax Credit (NMTC) has also been permanently extended to incentivize investment in rural communities. 
• Domestic R&D costs can now be immediately expensed—encouraging innovation across all industries, including ag tech. 

Farm Financial Strategies Under New Tax Policy 

In light of tax policy updates in the ‘Big Beautiful Bill’, there are several recommendations that could give your operation the upper hand when it comes to tax season.  

Reconsider Your Entity Structure 

With QBID and pass-through tax advantages now permanent, it may be time to consult with your advisor on whether your current structure is maximizing tax efficiency. 

Assess Business Deduction Opportunities 

With expanded expensing and depreciation options now in place, farmers should take a fresh look at their capital purchase plans. These updates give you more flexibility when and how you deduct the cost of new equipment or infrastructure. 

Revisit or Establish a Succession Plan 

Ensure your heirs understand the stepped-up basis and estate tax limits. Work with professionals to structure the ownership transfer of your farm to protect both you and your successors.  

Explore Biofuel Incentives 

For farmers producing biofuel feedstocks, the updated 45Z credit may present new opportunities for revenue generation and entice more farmers to enter biofuel feedstock production. 

Financing the Future of American Agriculture 

AgAmerica isn’t a certified tax advisor, but our team is deeply invested in the financial success of American farmers and ranchers. Many of us are producers ourselves, and we understand the long-term planning it takes to grow, transfer, and sustain a farming operation. 

Whether you’re looking to refinance, expand your acreage, or prepare for a generational transfer, we’re here to help you explore the financial tools to get there. 

Ready to build your future with greater financial confidence? Contact AgAmerica to speak with a land loan specialist today.