In our earlier overview, we covered the major provisions of the OBBB Act that matter to agriculture. Now, let’s focus on practical applications—ways to align your purchases, sales, and income with the new law to optimize cash flow, preserve eligibility for programs, and reduce long-term tax exposure.
1. Combining Section 179 and Bonus Depreciation
Scenario:
You run a mixed cattle and crop operation. In 2026, you purchase:
- A new hay baler – $145,000
- Fencing upgrades – $80,000
- A new grain bin – $210,000
- A breeding herd expansion – $250,000
Strategy under OBBB:
- Use Section 179 for the baler, fencing, and grain bin.
- Apply bonus depreciation for the breeding livestock and any remaining capital assets.
- Because bonus depreciation covers property with a 20-year or shorter recovery period, the grain bin also qualifies, but using Section 179 strategically preserves bonus depreciation flexibility for later purchases.
Benefit: Potentially write off the full $685,000 in Year 1, reducing taxable income significantly, freeing cash for operations or debt reduction.
2. Navigating the AGI Threshold Exemption
Many high-revenue farms and ranches are excluded from USDA programs because of the $900,000 AGI cap. The OBBB Act’s 75% rule changes that.
Example:
- AGI: $1.4M
- Ag-derived income: $1.1M (79%)
- Other income: $300K (21%)
Old Rules: No eligibility for certain disaster, conservation, or cost-share payments.
New Rules: Qualifies because ≥ 75% of AGI is from farming/ranching.
Action Item: Track and document income sources meticulously—grain/livestock sales, custom grazing, breeding services, etc. Misclassification could cost eligibility.
3. Installment Sale of Farmland
If you’re selling to a qualified farmer, spreading capital gains over four years can smooth income and manage tax brackets.
Example:
- Sale price: $4M
- Basis: $1.2M
- Gain: $2.8M
Lump-Sum Tax Impact: May push you into top capital gains bracket and phase out other benefits in one year.
Installment Method: Recognize $700K of gain each year over four years, keeping you in lower brackets and avoiding spikes in self-employment or NIIT exposure.
Key Point: Requires 10-year Ag-use history and 10-year Ag-use covenant with the buyer—this is non-negotiable.
4. Anticipating the Indirect Impact of Ag Loan Interest Exclusions
While the 25% interest income exclusion applies to lenders, not producers, the competitive lending market may push institutions to pass along savings via:
- Slightly reduced rates
- More flexible terms (e.g., longer fixed-rate periods)
- Higher loan-to-value limits for equipment or livestock loans
Action: Shop lenders aggressively—OBBB may make terms negotiable in your favor.
5. Estate Planning Alignment
With exemptions at $15M/$30M, your operation may now be fully shielded from estate tax—but only if assets are valued correctly and titled strategically.
- Use current high exemptions to gift ownership interests now.
- Revisit entity structures (LLCs, partnerships) to lock in valuation discounts.
- Consider integrating conservation easements where they align with land use and succession plans.
6. Rodeo & Specialty Ag Operations
Even if you’re primarily in rodeo or performance livestock, OBBB’s provisions apply if you:
- Own your own rigs, stock, or transport equipment (deductible under 179/bonus)
- Earn the majority of AGI from livestock, breeding, or event operations
- Invest in specialized facilities (practice arenas, breeding barns) with qualifying property status
CFO Bottom Line:
The OBBB Act isn’t just a tax bill—it’s a strategic toolkit. The largest gains will go to those who:
- Time purchases to leverage immediate expensing.
- Classify income accurately to meet AGI thresholds.
- Structure sales and transfers for long-term tax minimization.
- Integrate financing and estate planning with the new rules.
Author: Mike DiSabatino is an Accountant, Tax Strategist, and CFO with 35 years of experience helping businesses and taxpayers across the country protect assets, minimize taxes, and drive growth. A former CPA and corporate CFO, Mike honed his instincts for quick thinking and precise execution on the racetrack—skills he now applies to crafting winning financial strategies. His track record blends high-speed decision-making with deep technical expertise, delivering results that keep his clients ahead in today’s fast-changing economic environment.
Pull ahead and accelerate your business growth!
The first step toward financial success is scheduling a consultation with our team. Bring your questions and concerns to our attention. Our engines are revved and ready to drive your business across the finish line as the champion of your industry!
Pull ahead and accelerate your business growth!
The first step toward financial success is scheduling a consultation with our team. Bring your questions and concerns to our attention. Our engines are revved and ready to drive your business across the finish line as the champion of your industry!
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