By Brian Ravencraft, CPA, CGMA, Principal-Holbrook & Manter
I am sure you are aware of the changes in tax law, particularly from the “One Big Beautiful Bill Act” passed in July 2025. We continue to analyze all the changes and what they will mean to taxpayers. We plan to keep you posted in future articles as more changes take shape. However, for now, let’s take a quick look at several implications that affect the agricultural industry.
Tax relief and incentives:
- Reduced tax rates: The bill makes permanent reduced individual tax rates and increased standard deductions, benefiting most farm households.
- Increased small business deduction: The deduction for qualified business income is permanently set at 23%, aiding pass-through entities common in agriculture. Farmers should reconsider their entity structure to maximize tax efficiencies.
- Estate tax exemption: The permanent increase in the estate tax exemption to $15 million per person (indexed for inflation) makes it easier to pass farms to future generations. Farmers should revisit their estate/ succession plans and understand the estate limits.
- Section 179 expensing: The limit for deducting the full cost of eligible equipment and property in the year it’s placed in service is raised to $2.5 million. The new law also gives farmers more flexibility on how and when they deduct these newly added assets.
- Bonus depreciation: 100% bonus depreciation is restored and made permanent for purchases after January 19, 2025, allowing for immediate deduction of purchases of farm equipment and irrigation systems.
- Research and development (R&D) expensing: Immediate expensing for R&D costs is restored and made permanent. If you meet certain requirements, you can also go back several years and expense R&D costs on prior returns.
- Loan relief: Rules on tax payments for farmland sales to qualified farmers are relaxed, allowing four annual installments. Banks can also exclude 25% of interest received on new loans secured by agricultural land, potentially lowering borrowing costs for farmers. For sales or exchanges occurring after July 4, 2025, sellers of qualified farmland property may elect to pay capital gains tax on the sale in four equal annual installments. The first payment is due with the return for the year in which the sale occurs, with the remaining payments being due with the successive years’ returns (but if a payment is missed, the balance is due immediately). This provision is designed to encourage farmers to keep farmland in farming and to provide a more flexible tax treatment for them.
Other impacts:
- Concentration in agriculture: The removal of the “actively engaged in farming” requirement and increased payment caps in some programs may benefit larger farms and absentee owners, potentially contributing to consolidation and harming smaller farmers. Under the new law, billions in additional funding will be funneled toward agricultural subsidy programs, with large farms, particularly those in the South, poised to reap the most benefits.
- Conservation funding shifts: While the Inflation Reduction Act (IRA) provided significant funding for conservation programs, the new law shifted priorities by early terminating clean energy tax credits and redirecting the funds. Programs like the Environmental Quality Incentives Program (EQIP) and Conservation Stewardship Program (CSP), previously bolstered by the IRA, still exist but face potential funding reductions due to the new law.
- Farm safety net programs: The Act extends and enhances key farm safety net programs like the Price Loss Coverage (PLC), Agricultural Risk Coverage (ARC), and Dairy Margin Coverage (DMC) programs through 2031.
According to the current administration, the OBBB tax law aims to provide tax relief and support for the agriculture industry by including tax cuts, increased estate tax exemptions, and farm safety net programs. While also providing funding for conservation programs, it shifts funds away from other clean energy initiatives. The impacts of the new tax laws are complex, and both the agriculture industry and conservation efforts will need to adapt to these changes.
I certainly encourage you to be in frequent contact with your tax professional. Tax planning is very important and needs to take place year-round. As always, if I can help you, please reach out.