Kassidy Wagner

A new rule under the “Big Beautiful Bill” gives farmers and landowners a more flexible way to handle the tax bill when selling farmland. 

Section 1062 changes when you pay your tax, not how much. For many sellers, this shift can improve cash flow and ease financial pressure at the sale. 

What §1062 Does 

Under Section 1062, you can spread the federal tax on a farmland sale over four years instead of paying it all at once. 

You report the full gain in the year of sale, as usual. The tax is paid in four equal installments, without interest on deferred payments. Importantly, this applies even to cash sales, so you don’t have to structure the deal around financing to manage taxes. 

Who Qualifies 

This rule is designed to keep farmland in agriculture, so there are guardrails. 

To qualify: 

• The land must be qualified farmland. 

• The buyer must be actively engaged in farming. 

• The land must remain in agriculture for at least 10 years. 

• A binding covenant is required, and the election is made on your tax return. 

If those requirements aren’t met later, the IRS can claw back the benefit. 

Why This Matters for Family Transitions 

The 10-year farming requirement might seem restrictive at first, but it often makes §1062 a strong fit for family sales. 

When land is transferred to a child or another family member who will continue the operation, there’s typically a clear expectation that the property will remain in farming. That makes it easier to use this rule without worrying about claw backs. 

At the same time, the retiring generation benefits from a smoother financial transition. You can complete a clean sale, reduce the immediate tax burden, and avoid taking on the role of lender, all while keeping the operation moving forward. 

Why This Matters for Sellers 

For many landowners, the biggest challenge isn’t negotiating the deal; it’s handling the tax bill that follows. 

Section 1062 helps by easing that pressure in a few key ways: 

• Spreads the tax liability over four years instead of one 

• Improves post-sale cash flow 

• Eliminates the need for seller financing 

• Avoids buyer default risk 

The result is a simpler, lower-risk exit from farmland ownership. 

How This Helps Buyers 

Even though this is a seller election, buyers can benefit too. For example, when sellers face less tax pressure, buyers sometimes find it easier to negotiate purchase terms that meet their needs. Buyers may encounter less competition from outside investors, allowing more opportunities for committed farmers to acquire land. 

When sellers aren’t facing a large, immediate tax payment, they may be more flexible on pricing or terms. In some cases, it eliminates the need for seller financing altogether, making transactions more straightforward, especially in farmer-to-farmer or family transitions. 

§1062 vs. Installment Sales (Section 453) 

Section 1062 is often compared to installment sales, but the two address different problems. 

Installment sales require seller financing when buyers pay over time, creating some risk. Section 1062 allows a cash sale while letting the seller spread out tax payments. 

A helpful way to think about it: 

• Installment sale → payments are spread out over time. 

• Section 1062 → tax payments are spread out. 

The structure of the deal stays simple, but the tax burden becomes more manageable. 

When §1062 Makes the Most Sense 

Section 1062 is generally a strong fit when you want a clean cash sale but still need flexibility around the tax impact. It’s especially useful when selling to another farmer, or within the family, where long-term agricultural use is expected. 

Installment sales still have a place, particularly when the buyer needs financing or when you intentionally want to spread income over a longer period. The right approach depends on both the deal structure and your broader tax picture. 

Bottom Line 

Section 1062 is a practical tool that helps align tax payments with real-world cash flow. It supports keeping farmland in agriculture, simplifies transactions, and reduces the strain of a large one-year tax bill, without increasing the seller's risk. 

If you’re starting to think about selling farmland, consider the following. 

Every sale is different, and the way you structure it can have a lasting impact on your taxes and financial outcome. 

If you’re planning to sell farmland, especially to a family member, it’s worth reviewing your options before finalizing the deal. 

Contact Swanson Agency to walk through your situation and determine the best approach for you. The right structure can make a meaningful difference both now and long term.