Beginning Farmer Tax Deduction program aims to help young producers access farmland and keep family farms moving forward.
I grew up on a family farm alongside my brothers, spending long days working the land and learning firsthand what it takes to keep a farm running. Like many kids raised in agriculture, we loved the work and the lifestyle, but we also understood something else: There was no guarantee there would be room for all of us to return.
For many young farmers today, uncertainty still exists. High land values, rising input costs and tight margins can make it difficult for the next generation to step into agriculture, even when the desire and work ethic are there. If Missouri wants to keep family farms strong, we must ensure public policy, especially tax policy, helps open the door for young producers rather than unintentionally closing it.
Beginning Farmer Tax Deduction Program
One step Missouri has taken in the right direction is the Beginning Farmer Tax Deduction program. The program was stood up by legislation I helped pass and is designed to encourage farmland owners to sell or lease land to beginning farmers by offering tax deductions tied to those transactions. Under the program, landowners who sell farmland to a beginning farmer or eligible family member may deduct a portion of the capital gains from their Missouri adjusted gross income. The deduction begins with 100% of the first $2 million in calculated state capital gains and gradually decreases additional amounts, helping make generational land transfers more financially feasible.
The program also recognizes that not every transition happens through a sale. Many young farmers start by renting or entering into cropshare agreements. Landowners who rent, lease or enter into crop-share agreements with a qualified beginning farmer may deduct income received under those agreements, up to $25,000 per year, from their Missouri adjusted gross income.
The Breakdown
Deductible
($2,000,001 – $3,000,000)
Deductible
($3,000,001 – $4,000,000)
Deductible
($4,000,001 – $5,000,000)
Deductible
($5,000,001 – $6,000,000)
Deductible
To clarify, yes, the legislature did eliminate state capital gains. However, this program is still applicable because with the elimination of state capital gains, we created an income tax deduction across the board. Those taking advantage of this program would still receive benefits, but it is calculating capital gain before our efforts to eliminate them altogether. With this program’s intent being to help transfer farmland to the next generation, we have intentionally worked on policy that enables that in both instances.
Eligibility for Farmers
Beginning Farmer
A Beginning Farmer is a taxpayer who:
• Has filed at least one but not more than 10 IRS Schedule F forms since turning 18 years of age; or
• Is approved for a USDA Farm Service Agency Beginning Farmer loan; or
• Has a farming operation determined by the Missouri Department of Agriculture (MDA) to be new to production ag with substantial farming knowledge; or
• Has been determined by MDA to be a qualified family member.
Farm Owner
A Farm Owner is an individual who owns farmland and:
• Sells farmland to a beginning farmer; or
• Enters into a lease or rental agreement not exceeding 10 years with a beginning farmer; or
• Enters into a crop-share arrangement not exceeding 10 years with a beginning farmer.
Qualified Family Member
A Qualified Family Member is an individual related to a farm owner within the fourth degree by blood, marriage or adoption who purchases, leases or enters into a crop-share arrangement for land from all or a portion of such farm owner’s farming operation.
Next Step
If approved, the Missouri Agricultural and Small Business Development Authority (MASBDA) will review the application and send a certification letter to the farm owner. Copies will also go to the beginning farmer and the Missouri Department of Revenue (MDR). However, the farm owners are responsible for submitting the certification with their Missouri tax returns using Form MO-5955 to receive the tax deduction.
For multi-year lease, rental or crop-share agreements, the certification is good for one year at a time. Each year, both the farm owner and beginning farmer must sign and submit a simple verification form confirming the agreement is still active. Once received, the Authority will renew the certification for another 12 months.
If farmland has not officially sold yet, the farm owner may still receive a contingent certification before closing as long as all required paperwork and fees are submitted, except for the final closing statement. Once the closing documents are turned in, the final certification will be issued.
A Farmers’ Why
These kinds of policies matter because access to land is one of the biggest barriers facing young farmers. Programs like this encourage landowners to work with beginning farmers and help ensure farmland stays in production instead of leaving agriculture altogether.
Tax policy also plays an important role in helping farmers manage risk and keep operations viable for the next generation. Missouri has taken additional steps to ensure certain disaster-related payments can be subtracted from state taxable income, helping ensure those payments serve their intended purpose and stabilize farm operations rather than increase tax burdens.
To ensure you receive the full benefit available to your operation, MSA encourages all farmers to ask their CPAs or tax preparers about the agriculture disaster subtraction when filing their Missouri returns. A simple conversation could result in meaningful savings.
Missouri agriculture has always been built on long-term stewardship and generational opportunity. The decisions we make today should ensure the next generation of farmers has the same chance many of us had: the chance to return to the farm, build a business and continue feeding and fueling the world.
Farmers and landowners interested in learning more about the Beginning Farmer Tax Deduction program can find additional information through MDA or MASBDA. Additionally, reach out to my office if you have any further questions or would like to chat.
You can find out more about the program here: https://agriculture.mo.gov/abd/financial/begfarmtaxdeduction.php
