Farmers and landowners who sell farmland to someone who actually farms it could be allowed to pay the tax on the gain over four years instead of in one bill. Treasury and the IRS put the proposed rules out on September 28, and written comments must be received by November 30, 2026.

The installment option comes from Section 1062 of the Internal Revenue Code, added by the tax law President Donald Trump signed in 2025. The proposed regulations are the IRS’s first detailed explanation of how it would work, and they are not final.

What would the four installments look like?

Under the IRS release, IR-2026-115, an eligible seller would pay the tax in four equal annual installments of 25% of the applicable tax liability each. The first payment is generally due on the regular due date of the return for the year of the sale, without regard to extensions.

Each of the remaining three payments is generally due on the regular return due date for the following taxable year. The election covers sales or exchanges in taxable years beginning after July 4, 2025, so land sold this year can already be covered.

The Federal Register notice (REG-117095-25) adds that the seller makes the election by filing Form 1062 and Schedule A with the return for the year of the sale, by the return’s due date. Once made, it can be revoked only by paying the full remaining unpaid tax.

For a landowner weighing a sale this fall or winter, the practical point is that the one-bill-or-four decision has to be made on the return for the year of the sale. Sellers who are still negotiating should ask their tax preparer whether the buyer is an individual who is actively engaged in farming, because that is the buyer the proposed rules name.

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Which farmland sales qualify?

The buyer must be an individual who is actively engaged in farming. The land must be U.S. real property that the seller generally used for farming, or leased to a qualified farmer for farming, during substantially all of the 10 years before the sale.

The land must also be subject to a legally enforceable restriction that generally bars any use other than farming for 10 years after the sale. The Federal Register notice says that restriction, called a section 1062 covenant, must be attached to the return, and that without it the property does not qualify.

The proposed rules also explain how the 10-year farming test can be met when land was temporarily out of production under a government program, as part of recognized farming practices, or because of events outside the owner’s control. Partners in a partnership and shareholders in an S corporation generally make their own elections for their share of the gain, and similar rules apply when gain passes through a trust or estate to a beneficiary.

What happens if a payment is missed or the seller dies?

The proposed text lays out when the later installments come due early. If an addition to tax is assessed for failing to pay an installment on time, the remaining unpaid installments are due on the date of that assessment. When an individual seller dies, the remaining installments are due by the return due date for the year of death.

How can landowners comment before November 30?

IRS Chief Executive Officer Frank J. Bisignano said in the release, “Farmers should have practical options when farmland is sold.” Comments that arrive by the deadline can still shape the final version.

Electronic comments go to regulations.gov, referencing IRS and REG-117095-25 (docket IRS-2026-1288), according to the Federal Register notice. Paper comments go to CC:PA:01:PR (REG-117095-25), Room 5503, IRS, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. The notice says a public hearing will be held only if someone requests one in writing and submits comments on time.

The rules are still a proposal, and the IRS has not said when final regulations will follow. Further notices will appear in the IRS newsroom. The open question for a landowner is whether a planned sale meets all the tests before the year-end closing, and what the larger gain does to the rest of the return.

Selling land and dreading the tax bill?

A farmland sale puts a large gain on a single year’s return, and for retirees that same income can raise how much of a Social Security check is taxed and push a Medicare premium into a higher IRMAA tier. Spreading the tax bill does not by itself answer those questions.

The Retirement Tax & Withdrawal Planner includes four calculators (provisional income, IRMAA tier, RMD schedule, Roth bracket fill), and covers the account withdrawal order in Part 6. Those pages are built for the retirement-income side of a land sale.

Get the withdrawal planner’s income and IRMAA calculators for a farmland sale year →

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• 17 Medicare Money Moves Now That Part D Caps at $2,400

This article was produced with AI assistance and edited for accuracy against the sources linked above.