Treasury and the IRS proposed regulations on Sept. 28 that would let people who sell qualifying farmland to an active farmer spread the tax on the gain over four annual installments, an option created by Trump’s tax law, with written comments due Nov. 30.
Twenty-five percent at each return date
The IRS release, numbered IR-2026-115, says taxpayers making the election would pay 25% of the applicable tax liability with each of four annual installments. For every $100 of tax attributable to the gain, $25 would fall due in each payment.
The calendar is tied to the seller’s ordinary tax return. The first payment would generally be due on the regular due date of the federal income tax return, without regard to extensions, for the year of the sale or exchange. Each remaining payment would generally be due on the regular return due date for the following taxable year.
The phrase “without regard to extensions” carries weight for anyone who habitually files late. A seller who extends the filing of the return would still face the unextended due date for the first installment, so the tax cash for payment one has to be ready on the original calendar even when the paperwork is not.
The IRS provisions page, last reviewed Sept. 25, lists the option under section 70437 of the 2025 law, which the agency now calls the Working Families Tax Cuts. It describes the election as covering the net income tax attributable to gain from selling qualified farmland property to a qualified farmer, codified as section 1062 of the Internal Revenue Code.
Ten years of farming behind the land, ten years of limits ahead
The land itself has to meet a two-sided test. Under the proposed rules, it must have been used by the seller for farming, or leased to a qualified farmer for farming, during substantially all of the 10 years before the sale or exchange, according to the IRS.
After the sale, the property must be subject to a legally enforceable restriction that generally prevents any use other than farming for 10 years. That restriction is what separates this election from an ordinary sale to a neighbor, because it binds the land, and so the next owner, for a decade. A seller therefore has to confirm, before signing, that a buyer will accept a farming-only covenant on the property, since the release makes that restriction part of what qualifies the land.
The regulations also explain how a seller may still satisfy the prior-use requirement when farmland was temporarily taken out of production. The IRS lists three circumstances: a government program, recognized farming practices, or events outside the taxpayer’s control.
Only an individual farmer counts as the buyer
The buyer must be an individual who is actively engaged in farming, the release states. Sales to other kinds of buyers are not described as covered, so a seller weighing offers from an investor and from a working farmer would find that only the second can unlock the four-payment schedule.
For retirees, the structure matters as a cash-flow question. Selling land often converts decades of appreciation into a single year’s taxable gain, and the installment schedule changes when the tax cash has to be available. The proposal does not change how much tax is owed on the gain, only when it is paid, and the IRS release describes the payments as a share of the tax liability rather than a reduction.
Partners, shareholders and beneficiaries elect separately
Land is frequently held through entities. For partnerships and S corporations, the IRS says, partners and shareholders generally would make their own elections for their share of the gain. Similar rules would apply when gain passes through a trust or estate to a beneficiary.
That split means one family selling a jointly held parcel could see different owners reach different decisions about the schedule. The proposed rules place the choice with each person who bears the tax rather than with the entity.
What a proposal with a Nov. 30 comment date can and cannot promise
The regulations are proposed, so details can change before a final version. The IRS says written or electronic comments must be received by Nov. 30, 2026, following the instructions in the proposed regulations, which appear in a Federal Register notice titled “Election to Pay in Installments Tax on Gain From Certain Farmland Property”. An earlier public inspection version carried the same document number, 2026-19888.
The election itself does not wait for final rules. The statute, section 1062 of the tax code, applies to qualified sales or exchanges made in taxable years beginning after July 4, 2025, and the IRS says the proposed rules use the same applicability. The agency also issued Notice 2026-03, which its provisions page describes as relief from estimated tax penalties tied to these elections.
In announcing the proposal, IRS Chief Executive Officer Frank J. Bisignano said: “Farmers should have practical options when farmland is sold. The Working Families Tax Cuts helps keep farmland in agricultural use by allowing eligible sellers to spread their tax payments over four years when qualifying property is sold to active farmers.”
Reading the notice when a refund is held or reduced
A held or reduced refund arrives with a notice number and a paragraph of explanation, and the paragraph rarely says which document or payment the IRS is waiting on. Filers who let months pass can also run into the three-year limit for claiming money owed.
The IRS Refund Recovery Kit pairs a notice decoder with a refund status tracker spreadsheet, and it lists the 3-year refund deadline.
Compare notice types in The IRS Refund Recovery Kit.
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.
