IRS Gives Farmers a Do-Over on the Farm Interest Election
This does not apply to many farmers, but those who are affected need to review
If you elected out of the business interest limitation as an “electing farming business” back in 2022, 2023, or 2024, the IRS just handed you a chance to undo it. But you likely have until October 15, 2026, at the latest, and for some returns that date is already gone.
Rev. Proc. 2026-17 came out March 18, 2026. It lets you withdraw the Section 163(j)(7)(C) electing farming business election and be treated as if you never made it. That election used to be irrevocable. Now it is not, at least for a short window.
Why you would want out
When you made the election, you traded away depreciation to keep your interest deduction. Farm property with a recovery period of 10 years or more had to go on ADS, and none of it qualified for bonus depreciation. That means:
Drainage tile and land improvements went from 15-year to 20-year,
Single purpose ag structures went from 10-year to 15-year,
Machine sheds and general-purpose farm buildings went from 20-year to 25-year.
Your seven-year machinery was never affected.
The One Big Beautiful Bill Act changed the math. Starting with tax years beginning after December 31, 2024, you get to add depreciation back when computing adjusted taxable income again. That makes the interest limitation far easier to live with. And 100% bonus is now permanent. So, the election you made to solve a problem is now mostly just costing you depreciation.
A quick example
