Several significant changes to federal tax law were enacted in 2025 with the passage of the One Big Beautiful Bill Act (OBBBA). Many provisions directly affect farmers, with some taking effect in the 2025 tax year and others beginning in 2026 or later. While not exhaustive, the following summarizes ten of the most significant tax changes impacting farmers and farming operations.
Our Top 10
1. Permanent Estate and Gift Tax Exemption
OBBBA permanently increased the lifetime estate and gift tax exemption (basic exclusion) to $15 million per person for 2026, indexed annually for inflation starting in 2027. This resolves the uncertainty created by the 2017 Tax Cuts and Jobs Act, which temporarily increased the exemption from $5 million to $10 million per person. Indexed for inflation, this resulted in the 2025 exemption of $13.99 million per person, nearly $28 million for married couples. This higher exemption was scheduled to sunset at the end of 2025, reverting to $5 million base per person, which would subject more farms to estate or gift tax at the 40% rate. Making the higher exemption permanent eliminates the “sunset cliff” and allows farm families to engage in estate and succession planning based on long-term business and family goals rather than rushed gifting decisions incentivized by expiring law.
2. Bonus Depreciation
OBBBA restored 100% bonus depreciation and made it permanent for qualifying property acquired and placed in service after January 19, 2025, including trees and vines planted or grafted after that date. Bonus depreciation may be used for property with a 20-year life or less, including general farm buildings. Bonus depreciation will apply unless the taxpayer elects out of it for the year on a class-by-class basis. For property placed in service during the first taxable year ending after January 19, 2025, taxpayers have an additional choice - to elect 40% bonus depreciation. Between bonus depreciation and Section 179, farmers have expanded tools to manage taxable income.
3. Increased Section 179 Deduction
OBBBA increased the Section 179 expensing limit to $2.5 million and raised the phase-out threshold to $4 million for property place in service in 2025. The deduction is reduced dollar-for-dollar when qualifying purchases exceed $4 million in 2025. These amounts are permanent and indexed for inflation beginning in 2026. The increased Section 179 limit provides farms with the flexibility to manage taxable income with a targeted deduction.
4. Permanent Section 199A Qualified Business Income (QBI) Deduction
The 20% QBI deduction for sole proprietors and pass-through businesses, including agricultural cooperatives and their patrons, was made permanent. Beginning in 2026, a new minimum deduction of $400 will be available for taxpayers with at least $1,000 of active QBI who materially participate in the business. Also beginning in 2026, the income range over which the QBI deduction phases out will be increased, meaning that some higher income taxpayers will qualify for a larger QBI deduction.
5. Installment Payment of Capital Gains Tax on Qualified Farmland Sales
Beginning in 2026 for calendar-year taxpayers, sellers of qualified farmland may elect to pay capital gains tax over four years rather than with the tax return for the year of the sale. The provision does not alter the tax calculation or change the amount of tax resulting from the sale; however, it does provide flexibility to manage cash flow by spreading out payments to the IRS. To qualify, the land must have been used as a farm for farming purposes for at least 10 years prior to sale, sold to a buyer actively engaged in farming, and subject to a legally enforceable restriction limiting its use to farming for at least 10 years after the sale. Definitions of “farm” and “farming purposes” are the same definitions used for Special Use Valuation under Section 2032A of the Internal Revenue Code. This provision applies to sales occurring in tax years beginning after July 4, 2025, which for calendar year taxpayers is 2026.
6. Expiration of ACA Enhanced Premium Tax Credits
Many taxpayers purchasing health insurance through the ACA marketplace remain eligible for premium tax credits (PTCs); however, enhanced PTCs expire after December 31, 2025. This means that PTCs for all income levels will be reduced and that households with income above 400% of the federal poverty level will be ineligible for any PTC. This change, along with associated underwriting adjustements, will significantly increase net health insurance costs for many beginning in 2026. For 2026, 400% of the federal poverty level is $84,600 for a two-person household and $128,600 for a four-person household.
7. Meals Provided for the Convenience of the Employer
In 2025, employers may deduct 50% of meals provided to employees considered to be at the convenience of the employer, generally meaning meals furnished at the employer’s place of business for a business reason. A common example is providing meals to farm employees at remote locations. Beginning in 2026, these meals will no longer be deductible. There is an exception for certain fishing vessels and fish processing facilities, which may claim a 100% deduction.
8. Business Interest Deduction
Farms with average annual gross receipts exceeding $31 million now benefit from expanded business interest deductibility. While such businesses remain subject to the 30% limitation based on adjusted taxable income (ATI), OBBBA restored the ability to add back depreciation, amortization, and depletion when calculating ATI. This change increases allowable interest deductions. Farms may elect out of the business interest limitation, but doing so means that any property with a recovery period of 10 years or more must be depreciated using ADS and that bonus depreciation is not allowed for that property.
9. Temporary Additional Deduction for Seniors
For tax years 2025 through 2028, taxpayers age 65 and older may claim an additional deduction of up to $6,000, in addition to the standard deduction or itemized deductions. The deduction phases out beginning at modified adjusted gross income of $75,000 for single filers and $150,000 for joint filers and is fully phased out at $175,000 and $250,000, respectively.
10. Individual Tax Rates and Standard Deduction
OBBBA made permanent the increased standard deduction that was scheduled to be cut in half after December 31, 2025. For 2025, the standard deduction is $15,750 for single filers and $31,500 for married taxpayers filing jointly. OBBBA also permanently extends the tax rates and brackets created by the Tax Cuts and Jobs Act.