New Tax Code for Sale of Farmland Property

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Capital Gain from the Sale of Farmland Property to Qualified Farmers

New section 1062 has been added to the Internal Revenue Code (IRC), focusing on the gain from the sale or exchange of qualified farmland property to qualified farmers.  This new IRC Section 1062 was added by the One Big Beautiful Bill Act of 2025, which also involved the renumbering of the former Section 1062 to Section 1063

The Act creates a new election through which those selling farmland property to a qualified farmer can choose to pay their taxes on the gain in four equal installments. I.R.C. § 1062. The election is available to individuals, trusts, and entities that have either farmed the property or leased it to a qualified farmer for 10 years prior to the sale.

The seller can only make the election if the land is subject to a covenant or other legally enforceable restriction which prohibits the use of the property other than as a farm for farming purposes for 10 years after the date of the sale or exchange. A copy of the covenant must be filed with the first tax return.

A “qualified farmer” is an individual who is actively engaged in farming. This provision is effective for sales or exchanges occurring in tax years beginning after July 4, 2025.

Anthony J. Madonia & Associates is dedicated to all aspects of taxation and tax preparation. We understand what strategies need to be implemented to avoid unnecessary taxes. Our taxation practice area includes tax attorneys and CPAs experienced in all aspects of taxation and tax preparation. Contact us if you have questions about tax code.