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Farmland Sale Tax Installments: IRS Proposed Rules

By Sean Whitehead, Structured Settlement Consultant & Content Contributor · October 28, 2026

On Sept. 28, 2026, Treasury and the IRS released proposed regulations for Section 1062 of the Internal Revenue Code. The 2025 tax law (P.L. 119-21) added this section, which lets some farmland sellers pay the federal income tax on their gain over four years instead of all at once.

Who it applies to

The election covers farmland sales in tax years beginning after July 4, 2025. Three conditions apply:

• The land: The seller farmed it, or leased it to a qualified farmer, for substantially all of the prior 10 years.
• The restriction: A covenant or other legally enforceable restriction generally limits the land to farming for 10 years after the sale.
• The buyer: An individual actively engaged in farming.

How it works

The seller makes the election on Form 1062, filed with the return for the year of sale. The tax on the gain is split into four equal annual payments, and the first is due on that return's regular due date. Missing a payment makes the rest due at once, and so can the seller's death.

Why it matters

For sellers who sell to active farmers, this can ease a large one-year tax bill. It works differently from a regular installment sale:

• Section 1062: The gain is still counted in the year of sale, and only the tax payments are spread out. The buyer can pay in full at closing.
• Regular installment sale: The gain is reported as payments come in, and the seller waits on the buyer's payments.

Each approach has trade-offs.

Key dates

• Comments and hearing requests: Due Nov. 30, 2026. A public hearing will be held only if someone requests one.
• Relying on the proposed rules: Sellers may rely on them until final rules are issued, as long as they follow them in full.

These rules are proposed and may change before they are final.

Read the IRS release: IR-2026-115, Treasury, IRS issue proposed regulations on installment payments for tax on certain farmland sales

A structured installment sale is another way landowners can spread out the tax on a sale.

This article is general information, not tax or legal advice. Talk with a CPA or tax attorney about your situation.