Treasury Proposed Tax Installment Rules for Farmland Sales
Owners selling U.S. farmland may soon elect to pay capital gains taxes in four annual installments.
Updated on Sept. 28, 2026 in Agriculture
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Do you support tax policies that offer installment payments to encourage farming land preservation?
The IRS and Treasury Department have proposed new regulations allowing taxpayers to defer tax payments on qualifying farmland sales over four years. The proposal aims to preserve agricultural land use by offering liquidity to sellers who meet strict operational requirements.
Why it matters
By permitting taxpayers to spread tax liabilities over four annual installments, the rule seeks to lower the immediate financial barrier for selling land to active farmers, thereby incentivizing the continued agricultural use of the property.
The proposed rule allows taxpayers to pay 25% of the applicable tax liability per installment over four years. To qualify, land must have been farmed for 10 years prior to the sale and must remain under a 10-year enforceable restriction against non-farming use following the sale.
The players
IRS
The federal agency responsible for tax collection, administration, and the enforcement of tax compliance across the United States.
Treasury Department
The executive department that develops and executes federal economic and fiscal policy, including the issuance of tax regulations.
The details
Under this framework, sellers can elect to pay their tax burden in equal annual increments rather than a single lump sum, provided the buyer is an individual actively engaged in farming. Partners and shareholders in entities selling farmland may make independent elections regarding their share of gains. The structure hinges on a 10-year binding covenant that prohibits the purchaser from converting the land to non-agricultural purposes, ensuring long-term utility for the sector.
Timeline
• Taxable years starting on or after July 4, 2025, are eligible for the installment election.
• Public comments on the proposed regulations must be submitted by Nov. 30, 2026.
Market Landscape
This proposal continues the federal government's established trend of using the tax code to influence land-use outcomes, similar to the Inflation Reduction Act's conservation provisions. It marks a shift toward providing tax-based liquidity to support the long-term retention of agricultural assets.
Landowners should discuss the potential cash flow benefits of this four-year installment plan with their tax advisor to evaluate if their current parcels meet the 10-year farming history threshold. Owners should also monitor the final rulemaking process before committing to any land sale structure that relies on these specific payment terms.
The takeaway
The proposed rule introduces a critical cash flow lever for those planning to transition farmland to the next generation of operators. Interested parties should prepare feedback for the Nov. 30, 2026, comment deadline to ensure the final regulatory language accounts for operational realities.
Further reading
For more on evolving federal policies affecting producers, see our coverage of Agriculture.
Live Poll
Do you support tax policies that offer installment payments to encourage farming land preservation?
