- Eligible sellers of qualifying U.S. farmland used for farming in the prior 10 years can spread the tax on the gain over four equal annual payments if the buyer is an active farmer and the land carries a 10-year post-sale farming restriction.
- The first installment would generally be due on the regular federal return deadline for the sale year, without a filing extension; three annual installments would follow.
- Comments on the proposed regulations are due by Nov. 30, 2026; rules also cover pass-through entities and circumstances where farmland was temporarily out of production.
Who Can Use the Installment Election
The proposed regulations implement Section 1062 of the Internal Revenue Code, which permits certain taxpayers to pay the federal income tax attributable to gain from qualifying farmland sales or exchanges in four equal annual installments.
To qualify, the farmland must be real property located in the United States. The seller must have used the property for farming purposes, or leased it to a qualified farmer for such purposes, during substantially all of the 10-year period ending on the date of sale.
The announcement says the property must carry an enforceable restriction that generally prevents non-farming use for 10 years after the transaction. The buyer must be an individual actively engaged in farming.
Effective Dates and Payment Schedule
The installment election is available for qualified sales or exchanges occurring in taxable years beginning after July 4, 2025.
Taxpayers who make the election pay 25 percent of the applicable tax liability in each of four installments. The first payment is generally due on the regular due date of the seller’s federal income tax return for the year of the sale, without extensions.
The remaining installments would generally fall on the regular return deadline for each following tax year. A seller should check the proposed regulation itself for the detailed payment and election provisions.
Rules for Pass-Through Entities
The proposed regulations address sales by partnerships, S corporations, trusts and estates. In the case of partnerships and S corporations, the election is generally made at the partner or shareholder level with respect to their distributive share of the gain.
Similar pass-through rules apply when gain from a trust or estate flows through to beneficiaries, allowing eligible recipients to make their own installment elections.
Special Rules for Prior Farming Use
The proposed rules address circumstances in which land temporarily leaves production during the prior 10-year period, including government programs, recognized farming practices and events outside the taxpayer’s control. The announcement does not make every interruption qualifying; the detailed proposal sets out the conditions.
Next Steps and Comment Period
These are proposed regulations issued by the Department of the Treasury and the IRS on Sept. 28, 2026. They are not yet final and remain subject to change based on public input.
Treasury and the IRS invite comments by November 30, 2026, using the instructions in the proposed regulations. Section 1062 already provides the statutory election; readers should distinguish that existing law from the implementation details in this proposal.
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Announcement covered: Sep 28, 2026. Editorial standards.
General information only, not individual tax, legal, or financial advice. Rules, deadlines, and eligibility depend on your circumstances. Check current official guidance or consult a qualified professional.
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