Equipment Gains and the Two-Thirds Test: A Quiet Change in the 2025 Pub 225
Publication 225 - Farmer's Tax Guide has changed a bit
If you’ve sold a lot of equipment this year, the IRS may have just made your estimated tax planning a little less certain. Here’s the setup, then the wrinkle.
The farmer estimated tax rules
Farmers get a break that other taxpayers don’t. If you’re a “qualified farmer” with at least two-thirds (66⅔%) of your gross income from farming, in either the current or prior year allows you to skip the quarterly grind. Either make a single estimated payment by January 15 and file by the normal due date, or file and pay all the tax due by March 1 with no estimate at all. Your required payment is the smaller of 66⅔% of the current-year tax or 100% of the prior-year tax which is easier than the 90%/100(110)% everyone else faces.
The whole benefit hinges on clearing two-thirds, so it matters a great deal what counts as gross income from farming.
Why equipment gains matter
When you sell or trade a tractor or combine, most of the gain is depreciation recapture and can be a big number. If it counts as farm gross income, it pushes you toward two-thirds. If it doesn’t, a large farm equipment-sale year can drop you below and cost you the special treatment.
The change
