Treasury and the IRS have proposed rules that would let farmland sellers pay the tax on their gain in four yearly installments, as long as the buyer is a qualified farmer. Each payment would be 25% of the tax. Written comments are due by November 30, 2026, and the rules are not final until the agencies publish them.
How would four installments change when the tax is due?
The election comes from section 1062 of the Internal Revenue Code, a provision added by the 2025 tax law, Public Law 119-21, signed on July 4, 2025. The IRS announcement, numbered IR-2026-115 and dated September 28, 2026, says eligible sellers could spread payment of the tax attributable to the gain over four years.
A farmland owner selling to a younger farmer would owe the first installment on the regular due date of the return for the sale year. Extensions do not move that date. Each remaining payment would generally be due on the regular due date of the return for the following tax year.
For a retiree selling the family land, the answer to when the tax is owed is therefore not four years away. A quarter of the tax is still due with the return for the year of the sale, and the rest follows over the next three years.
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IRS Chief Executive Officer Frank Bisignano said, “Farmers should have practical options when farmland is sold.” He said the election “helps keep farmland in agricultural use by allowing eligible sellers to spread their tax payments over four years.”
The election is not a tax cut or an exclusion. All of the tax is still owed. The proposal changes the schedule of payments, and neither the IRS release nor the Federal Register notice puts a dollar figure on what a seller would save.
What land and which buyers are covered?
The conditions are strict, and each must be met. The land must be real property in the United States that the seller farmed, or leased to a qualified farmer for farming, during substantially all of the 10 years before the sale or exchange.
The buyer must be an individual actively engaged in farming. The proposed regulations, published in the Federal Register on September 29, 2026, tie that to the farm program rules in 7 U.S.C. 1308-1. A buyer does not count if, under a pre-arranged plan, the property is passed on to an unrelated person who is not a qualified farmer.
The land must also be subject to a legally enforceable restriction that bars non-farm use for 10 years after the sale. The seller attaches a copy of that covenant to the return.
The proposal says the 10-year farming test can still be met when land was temporarily taken out of production under a government program, as part of recognized farming practices or because of events outside the owner’s control.
What happens if a payment is missed?
The election is made by filing Form 1062 and Schedule A of that form with the return, no later than the return’s due date. Once made, it can be revoked only by paying the full remaining tax.
The proposal lists acceleration events, which make the remaining tax due at once. They include a missed installment payment and the death of an individual seller. For trusts, estates and C corporations, a sale or liquidation of substantially all assets or an end to the business also counts.
An exception applies if an eligible transferee agrees to take over the remaining payments under a transfer agreement, filed on Form 1062-T. For a family farm, that could matter when land and the unpaid installments are meant to stay in the family.
How do partnerships, estates and trusts fit?
When a partnership or S corporation sells the land, partners and shareholders generally make their own elections for their share of the gain. The entity files Schedule A and gives copies to its owners. Trusts and estates follow a similar approach when gain passes through to a beneficiary.
That affects a family that holds farmland in an LLC taxed as a partnership. Each owner would decide separately whether to elect, rather than the entity deciding for all of them.
Who can still change the rules, and how?
The IRS says the election applies to qualified sales or exchanges in tax years beginning after July 4, 2025. Under the proposed regulations, taxpayers may rely on them for earlier years if they follow the rules in their entirety and consistently, until final regulations apply.
Comments and requests for a public hearing must be received by November 30, 2026. Electronic submissions are preferred and go through regulations.gov, referencing REG-117095-25. Hearing requests can also go to publichearings@irs.gov. Submitted comments cannot be edited or withdrawn and will be made public.
Technical questions go to Nathan Cox in the IRS Office of Associate Chief Counsel for Income Tax and Accounting. Because proposed rules can change before they are final, a seller closing on land this year is relying on a draft.
Selling land to a younger farmer this year?
A farmland sale can put a one-time gain on a retiree’s tax return, and the first quarter of the tax still comes due with that year’s return. How the year’s income lands against other thresholds is what is left to plan.
The Retirement Tax & Withdrawal Planner includes four calculators, covering provisional income, IRMAA tier, RMD schedule and Roth bracket fill, plus the account withdrawal order. It is meant for working out how a large income year interacts with the taxes and Medicare surcharges retirees already track.
Each calculator takes the numbers from a retiree’s own situation, so a sale can be tested against them before the closing date.
Get the retiree tax planner with calculators for a big land-sale year →
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
