Written by Barry Ward, Leader, Production Business Management and Jeff Lewis J.D., Legal Associate, Agricultural and Resource Law Program, Income Tax Schools
The One Big Beautiful Bill (OBBB) Act (H.R. 1), was passed, signed and became law on July 4th. This Act impacts taxes and agricultural policy among a long list of other important issues. In this post, we list important tax provisions that were included in this legislation. Many of the provisions were law as a part of the Tax Cuts and Jobs Act and were extended and in some cases made permanent by this new Act. There were also a few new provisions that were included in this new legislation. This article will summarize the provisions that should prove to be most important to farmers and others with ag interests.
Qualified Business Income Deduction
The 20 percent Qualified Business Income Deduction (QBID) for sole proprietors and pass-through businesses under I.R.C. § 199A is made permanent by this Act. This includes the I.R.C. § 199A(g) deduction for agricultural cooperatives and their patrons.
This new legislation includes a new minimum $400 deduction for taxpayers with at least $1,000 in “active” qualified business income. Both amounts will be adjusted annually for inflation.
Estate and Gift Tax Exemption
This Act permanently increases the estate and gift tax exemption (basic exclusion or Unified Credit), beginning in 2026, to $15 million per person, indexed for inflation.
Individual Income Tax Rates
The OBBB Act permanently extends the tax rates and brackets enacted by the Tax Cuts and Jobs Act.
Standard Deduction
Beginning in 2025, this Act provides an increase in the Standard Deduction to $15,750 for singles, $23,625 for heads of household, and $31,500 for marrieds filing joint. This increased standard deduction is also made permanent.
Personal Exemption
The personal exemption is permanently repealed by this Act.
Temporary Deduction for Seniors
The OBBB Act provides seniors (those 65 years of age and older) with an additional $6,000 deduction for tax years 2025-2028. Married seniors filing joint returns are entitled to the deduction, as long as they meet the income requirements.
The deduction is available for seniors who take the standard deduction or for those who itemize deductions but does begin to phase out for taxpayers with incomes of $75,000 (single) or $150,000 (MFJ).
Child Tax Credit and Other Dependent Credit
The Act permanently creates a child tax credit of $2,200 (adjusted for inflation) (beginning in 2025) for qualifying children under 17. (Income phase-out thresholds – $200,000 for singles and $400,000 for MFJ). The legislation also makes permanent the $1,400 refundable portion of the credit, indexed for inflation.
The Act also makes permanent the $500 nonrefundable credit for other dependents who do not qualify for the child tax credit, including those over the age of 16.
Additional First Year (Bonus) Depreciation Changes
The OBBB Act permanently increases bonus depreciation to 100 percent for property acquired after January 19, 2025. For property placed in service during the first taxable year ending after January 19, 2025, the taxpayer can elect to use 40 percent bonus depreciation. These provisions also apply to trees and vines planted or grafted after January 19, 2025.
Section 179 Expense Enhancements
The Act permanently increases the maximum Section 179 deduction to $2,500,000 and increases the phaseout threshold amount to $4,000,000 for property placed in services in taxable years beginning after 2024. These amounts will be indexed for inflation after 2025.
Exception from Limit on Business Meal Deduction
The 50 percent deduction for meals for the convenience of employers is scheduled to end at the end of 2025.
1099-MISC and 1099-NEC Requirements
The new law increases the payment threshold to $2,000 per payee to file 1099-MISC and 1099-NEC information returns, beginning with payments made in the 2026 tax year. The current threshold of $600 per payee remains in effect for the 2025 tax year. Reminder: Copies of the Form 1099-NEC or 1099-MISC must also be provided to payees.
1099-K Requirements
The OBBB Act also settles the confusion surrounding 1099-K reporting requirements. The Act provides that third-party settlement organizations are not required to issue a payee a 1099-K unless the payee receives over $20,000 in total payments and conducts more than 200 transactions in a year.
Gain from the Sale or Exchange of Farmland Property to Qualified Farmers
The OBBB Act creates a new election for those selling farmland property to a qualified farmer (an individual who is actively engaged in farming). This election allows the seller to choose to pay their taxes on the gain in four equal installments. The election is available to individuals and other entities that have either farmed the property or leased it to a qualified farmer for 10 years prior to the sale.
The seller can only make the election if the land is subject to a covenant or other legally enforceable restriction which prohibits the use of the property other than as a farm for farming purposes for 10 years after the date of the sale or exchange. A copy of the covenant must be filed with the first tax return.
This provision is effective for sales or exchanges occurring in tax years beginning after July 4, 2025.
Clean Fuel Production Credit
The Act extends the clean fuel production credit under I.R.C. § 45Z for fuel sold through December 31, 2029 but the Act restricts the credit to fuel produced from domestic feedstocks. It also reduces the credit for sustainable aviation fuel from $1.75 per gallon to $1.00 per gallon after 2025.
Carbon Oxide Capture and Sequestration Credit
The current I.R.C. § 45Q carbon oxide sequestration credit remains intact as a part of this Act. It does add a provision to allow all uses (not just sequestration) to receive the same $85/ton rate. The credit is not scheduled to expire until 2033.
Clean Vehicle Credits
The Act ends clean vehicle tax credits for all vehicles purchased after September 30, 2025. The Act also ends the alternative fuel vehicle refueling property credit for property acquired after June 30, 2026.
This article highlights tax provisions that should be of primary interest to those involved in farming and agriculture. This article does not summarize all tax provisions found in the OBBB Act. Information on all provisions found in this Act can be found at Congress.Gov by viewing a summary of the Act: https://www.congress.gov/bill/119th-congress/house-bill/1
Reference: One Big Beautiful Bill Act Implements Significant Tax Package, Iowa State University, Center for Agricultural Law and Taxation, Kristine A. Tidgren, July 9, 2025