Great News on Payment Limits
The new rules on payment limits are very favorable
OBBBA created new Payment Limitations for Qualified Pass-Through Entities. Under the old rules, LLCs and S corporations were subject to one payment limit.
USDA just released the new rules on payment limits and here are our quick thoughts on the new rules.
The new rules will be effective beginning with the 2026 crop year as expected.
Members and owners will be allowed to be paid either salaries or guaranteed payments for their services to the entity. Under old rules, being paid for labor or management could have disallowed an entity from receiving payments.
There will be no AGI testing at the entity level. Each owner will be required to meet the $900,000 AGI limit. If they do not, then the payment will be reduced based on ownership 5%.
Each member of the entity will be required to meet the actively engaged rules.
This is our very quick look at the rules and will dig in further and will also review the Handbooks as they are updated.
But the bottom line is this is good news for most farm operations.