Many Tax Features Extend or Modify Provisions of Tax Cuts and Jobs Act of 2017

The One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025, included numerous tax provisions that will impact farm owners along with other American taxpayers. While the OBBBA is also notable for including the 2025 Farm Bill, farmers also rely on the tax code for incentives that make farming economically viable.

The most compelling tax provisions of the OBBBA include a return to 100% bonus depreciation, expansion of Sec. 179 expensing for new equipment and a permanent $15 million estate tax exclusion indexed for inflation. Many of the tax provisions in the OBBBA modify provisions from the Tax Cuts and Jobs Act (TCJA) of 2017, some of which were scheduled to expire at the end of 2025 or were phasing down toward expiration in a future year.

Following is a list of the major tax provisions of this sweeping legislation that will benefit many farmers.

100% Bonus Depreciation

The OBBBA provides significant tax benefits through restoration of 100% bonus depreciation, retroactive to Jan. 19, 2025. The legislation also makes 100% bonus depreciation permanent. The TCJA had provided 100% bonus depreciation, with a step-down of 20% per year starting in 2023 until scheduled expiration in 2027. The step-down reached 40% in 2025. With restoration of 100% bonus depreciation being retroactive, businesses that have already made capital expenditures since Jan. 19, 2025, with the expectation of 40% bonus depreciation will now be able to claim 100% depreciation.

Section 179 Deduction Limits

Sec. 179 allows businesses to deduct the cost of certain equipment immediately, rather than over time. Qualifying purchases include office furniture, computers and certain software, business machinery and certain vehicles, including farm tractors and combines. The deduction amounts are limited, but the OBBBA raised those limits, starting with the 2026 tax year, to $2.5 million (from $1.25 million), and raised the phaseout threshold, where your Sec. 179 deduction starts to shrink, to $4 million (from $3.13 million).

Qualified Business Income Deduction (Sec. 199a)

The OBBBA made the Qualified Business Income (QBI) deduction permanent. Created by TCJA, the QBI deduction had been scheduled to expire at the end of 2025. The QBI deduction enables sole proprietors and owners of pass-through entities to deduct 20% from the qualified income of a U.S. trade or business. Eligible taxpayers include sole proprietors, partnerships, S corporations and limited liability companies. Limits on the deduction gradually phase in if 2025 taxable income exceeds the applicable threshold — $197,300 or $394,600 for married couples filing joint tax returns. The limits fully apply when 2025 taxable income exceeds $247,300 and $494,600, respectively.

Permanent Estate Tax Exemption of $15 million

The change to the estate tax exemption is perhaps one of the most striking provisions in the OBBBA. The legislation permanently places the exemption at $15 million for a single taxpayer ($30 million for married filing jointly), indexed for inflation, effective in 2026. While this is a modest increase from the current exemption of $13.9 million for an individual, under TCJA the exemption was scheduled to revert to the pre-2017 level of approximately $7 million. This would have significantly impacted estate planning for millions of taxpayers.

Restored Expensing of R&D Costs

For businesses, including farms, one of the most welcome changes in the OBBBA is restoration of immediate expensing of research and development (R&D) costs. Under the TCJA, R&D expenses were required to be capitalized and amortized over five years for domestic activities, and 15 years for international. This resulted in significant tax liability for many farmers since amortization reduced the value of the R&D tax credit. The permanent restoration of expensing R&D costs under the OBBB is retroactive to Dec. 31, 2024, enabling companies to fully deduct R&D expenditures starting with the current 2025 tax year. Additionally, qualifying small businesses may retroactively deduct R&D expenses from tax returns for 2022, 2023 and 2024.

Cap and Limitations on State and Local Tax (SALT) Deduction

One of the most controversial provisions of the TCJA was a $10,000 cap on the amount of state and local taxes (SALT) taxpayers could deduct on their federal income tax returns. The OBBBA raises the SALT deduction cap to $40,000 for married taxpayers filing jointly ($20,000 for single), indexed to a 1% annual increase, effective for the 2025 tax year. However, the more generous cap comes with limits. Taxpayers must itemize deductions to claim the cap, and the cap begins to phase out for taxpayers with adjusted gross income of more than $500,000. Additionally, the cap is temporary and will revert to $10,000 in 2030.

Additional Standard Deduction for Taxpayers Over 65

The OBBBA introduces a $6,000 deduction — in addition to the standard deduction — to taxpayers over age 65. This temporary deduction is available for tax years 2025 through 2028, and taxpayers do not need to itemize to claim it. This deduction phases out for taxpayers with modified adjusted gross income (MAGI) of $150,000 (married, filing jointly) or $75,000 (single). To qualify, a taxpayer must turn 65 on or before the last day of the tax year.

Election to Pay Tax on Gain from Farmland Sale in Installments

The OBBBA introduces a new election for taxpayers who sell farmland to a qualified farmer (defined as an individual who is actively engaged in farming). The election allows the seller to pay taxes on the gain from the sale in four equal installments. To qualify, the seller, which can be an individual or other entity, must have either farmed the property or leased it to a qualified farmer for 10 years prior to the sale. The seller can make the installment election only if the land is legally restricted to use for farming purposes for 10 years after the date of sale. A copy of the legal document (i.e., a covenant) must be filed with the first tax return. This provision is effective for sales or exchanges made after July 4, 2025.

Loss of Deductibility for Cost of Providing Field Meals

Under TCJA, the deduction for the cost of meals provided by an employer for the employer’s convenience was set at 50%. That drops to zero starting in 2026, meaning farm owners will no longer be able to deduct the cost of meals provided to workers in the field.

Questions?

We will continue to provide analysis of the impact of the OBBBA focusing on how it affects individuals, farm owners and business owners. If you would like more information on how it affects you, contact an Adams Brown agriculture advisor.