Kassidy Wagner

Montana producers are staring down the final stretch of 2025, and the next three weeks can make or break your year-end tax bill. For farmers and ranchers west of Interstate 15, from the Hi-Line to the Flathead to the Helena Valley, a few well-timed decisions now can make a meaningful difference heading into 2026.

With strong livestock markets, patchy moisture, and rising input costs, year-end planning matters more than ever. Here are the key strategies to consider before December 31.

1. Prepay Inputs Before December 31 (Only If It Helps Your Operation)

Prepaying remains one of the most effective tools for smoothing out high-income years, especially after strong livestock prices in 2025.

Common prepays:

• Feed, hay, minerals, supplements

• Fertilizer and seed for 2026

• Diesel for feeding/planting

• Vet and breeding services

• Chemicals/custom application

• Irrigation supplies and repair parts

IRS rules:

• Must serve a business purpose (not just tax reduction)

• Must be specific and nonrefundable

• Generally limited to 50% of total farm expenses

For many producers west of I-15, prepays help both cash flow and tax planning.

2. High Livestock Prices = Higher 2025 Taxable Income

Prices for calves, yearlings, and culls stayed strong throughout 2025. Great for revenue, tough on taxes.

Ways to manage livestock income:

• Use prepays to offset higher earnings

• Defer late-year sales to January 2026 (if not yet delivered)

• Use farm income averaging to smooth out a standout year

• Check drought-related deferral options (varies by county)

• Consider advancing planned equipment purchases, but only if you truly need them

The goal is simple: protect profit without spending unnecessarily.

3. Time Hay, Grain, and Livestock Sales Wisely

Hay

Across the Flathead, western ranch country, and the Hi-Line, hay often moves later in the season as winter feeding ramps up.

• If delivery or invoicing hasn’t happened, January 2026 payment may reduce 2025 taxable income.

• Make sure deferral aligns with your winter cash needs.

Grain & Specialty Crops

• Stored grain often qualifies for deferred-payment contracts, letting you push settlement into 2026 while still capturing good prices.

Livestock

• If animals are still on the place, a January settlement is a clean and IRS-approved way to shift income to the next tax year.

4. Know When Crop Insurance Payments Can Be Deferred

You may defer 2025 crop insurance proceeds to 2026 if:

1. Your operation normally sells the crop the year after harvest, and

2. The payment was tied to yield loss, quality loss, or prevented planting.

Price-only losses generally cannot be deferred.

5. Equipment Must Be “Placed in Service” by December 31

To deduct equipment on your 2025 return, it must be:

• Delivered

• Installed

• Ready for use

This applies to:

• Feeding/haying equipment

• Handling systems

• ATVs/UTVs

• Tractors, balers, processors

• Grain bins/storage improvements

Delivery timing matters, especially with Western Montana supply delays.

6. Use Farm Income Averaging for Big Swings in Profit

Farm income averaging lets you spread part of your 2025 income over 2022–2024 tax years.

Useful when:

• Livestock prices surged

• You sold more culls/yearlings

• Hay or crop markets were strong

• You received large insurance or disaster payments

Many producers west of I-15 benefit from averaging because year-to-year income swings are significant.

7. Protect January Cash Flow Before Deferring Income

Winter feeding is long in western and central Montana. Before shifting income into 2026, ensure cash is available for:

• Feed purchases

• Fuel

• Vet work and preg checks

• Early seed/fertilizer bookings

• Equipment repairs

• Irrigation startup costs

Deferring income helps taxes, but only if it doesn’t strain winter operations.

Final Thoughts: Three Weeks, Big Opportunities

As 2025 wraps up, farms and ranches west of I-15 are in a pivotal window to strengthen their tax position going into 2026. Strong cattle markets and variable yields mean your year-end moves matter.

Over the next three weeks, focus on:

• Strategic prepays

• Managing livestock income

• Timing crop and hay sales

• Understanding crop insurance deferral

• Placing equipment in service

• Leveraging income averaging

• Protecting winter cash flow

A handful of intentional steps before December 31 can help keep more of your 2025 profit in your operation, where it belongs.