Farmers and landowners who sell qualifying farmland can pay the resulting tax in four annual installments of 25% each, instead of in one lump sum. The Treasury Department and the Internal Revenue Service issued proposed regulations on the election on Sept. 28, 2026, and the option itself already applies to qualifying sales made in tax years beginning after July 4, 2025.
The regulations are still proposed, with public comments due Nov. 30, 2026. Even so, the proposal tells sellers they may rely on it now, which makes the installment option usable on a return filed today.
Four payments of 25% each
Under the IRS announcement, IR-2026-115, taxpayers making the election “would pay 25% of the applicable tax liability with each of four annual installment payments.” The first installment falls due on the regular return due date for the year of the sale, and the remaining three follow in each of the next three years.
The election comes from Section 1062 of the Internal Revenue Code. It spreads the tax on gain from a qualified sale or exchange of farmland rather than reducing it, so the total owed does not change. What changes is timing: a seller facing a large one-year bill on land held for decades can pay it over four years instead of finding the cash at once.
IRS Chief Executive Officer Frank J. Bisignano said in the announcement: “Farmers should have practical options when farmland is sold.”
Which sales and which sellers qualify
Three conditions in the IRS description define the class of sellers who can use the election.
- The land. The property must be U.S. real property generally used by the taxpayer for farming purposes, or leased to a qualified farmer for farming purposes, during substantially all of the 10 years before the sale.
- The restriction. The land must be subject to a legally enforceable restriction preventing non-farming use for 10 years after the sale.
- The buyer. The buyer must be an individual who is actively engaged in farming. A corporation or other entity buying the land does not meet that test.
The sale must also fall in a tax year beginning after July 4, 2025. A sale closed earlier than that falls outside the election.
Why the proposed status does not stop sellers from electing
Proposed regulations normally carry no binding force until finalized, and that is the reason for the caution around the phrase “new Treasury rules.” The proposal addresses the gap directly. According to the Federal Register preamble, published Sept. 29, 2026, “Taxpayers may rely on these proposed regulations under section 1062 with respect to qualified sales or exchanges that occur in a taxable year beginning after July 4, 2025, and ending on or before the date these regulations are published as final regulations in the Federal Register, provided that the taxpayers comply with these proposed regulations in their entirety and in a consistent manner.”
In practice, a seller whose tax year already began after July 4, 2025 does not have to wait for a final rule. Reliance is conditional, however: the seller has to follow the proposal in full, not pick the favorable parts. If the final regulations differ, the proposal’s own applicability language points to sales in years ending after final publication, so a seller who relies on the proposal is accepting some risk of later adjustment in exchange for using the option now.
Making the election on the return
The statute sets the deadline: the election must be made no later than the due date for the return for the tax year of the qualified sale or exchange. Under proposed Section 1.1062-2(b)(1), the taxpayer completes and files Form 1062 and a Schedule A (Form 1062) with the return, or follows any other manner the IRS prescribes in later guidance.
The proposal also sets a limit on second thoughts. Once made, an election may be revoked only by paying the full amount of the remaining unpaid applicable net tax liability. A seller who elects installments and later wants out has to pay everything still outstanding at once.
Comments and the agency contact
Comments on the proposal are due Nov. 30, 2026. The Federal Register notice lists Nathan Cox of the Office of Associate Chief Counsel (Income Tax and Accounting) at (202) 317-7006 as the contact for questions about the regulations. Sellers with a closing planned in the coming months have a practical reason to weigh in or at least read the proposal, since the final text will govern sales in later years and may refine how the form and the 10-year restriction work.
Because the first installment is due with the return for the sale year, the cash planning for a land sale now has two parts: the first quarter of the tax liability due on the ordinary filing date, and three more annual payments after it. The details of each calculation rest on the proposed regulations and the official forms, which the IRS and the Federal Register notice make available directly.
Keeping IRS paperwork in order after a land sale
Taxpayers who deal with IRS notices, late refunds and multi-year payment schedules often end up sorting letters and dates by hand. The IRS Refund Recovery Kit is written for readers who want that paperwork organized in one place.
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This article was produced with AI assistance and checked against the primary sources linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
