IRS Provides Limited Relief for Estimated Taxes for Sale of Farmland
OBBBA created new Section 1062 that allows tax on sale of farmland to be deferred
Section 1062 was added to the Tax Code by the One Big Beautiful Bill Act that allows taxpayers who sell qualifying farmland to defer paying 75% of the tax over three years. 25% of the tax is due April 15 (the normal due date) and the remaining 75% is spread equally over the next three years and is due each April 15.
In order to qualify for this provision, the land must have been farmed for at least 10 years before the sale and the sale must be made to a qualifying farmer who will elect to put a covenant on the land that will restrict the land to farming for at least 10 years.
There has been some concern that the estimated tax penalty provisions might mitigate some of the benefit of making this election.
Taxpayers are normally required to pay estimated taxes in four quarterly installments, and the minimum amount is either 100/110% of the previous year’s taxes or 90% of the current year tax.
