# Plain Language Summary: Farmland Capital Gains and Retirement Accounts

This bill creates a tax break for farmers and landowners who sell farmland and put the money into retirement accounts. Here's what that means in practical terms: if you sell farmland at a profit, you normally have to pay taxes on that gain. Under this bill, if you take those profits and invest them into an individual retirement plan (like a traditional IRA or similar account), you wouldn't have to count that money as income for tax purposes—meaning you'd avoid paying federal income tax on those gains.

The main benefit goes to people who own agricultural land and are planning to retire or transition their farming operations. Let's say a farmer sells 100 acres of land for $500,000 more than they originally paid for it. Normally, they'd owe federal income tax on that $500,000 profit. But if they immediately put that $500,000 into a retirement account, this bill would let them skip paying taxes on it. This is similar to how people can already put money into retirement accounts and defer taxes, but this bill specifically extends that benefit to farmland sales.

This could make it easier for farmers to save for retirement without getting hit with a large tax bill when they sell their property. However, the bill would likely reduce federal tax revenue, since the government wouldn't collect taxes on these gains. It also primarily benefits people who own valuable farmland and have the ability to invest large sums into retirement accounts, so it's not a benefit that would apply to most Americans—mainly agricultural property owners.

A bill to amend the Internal Revenue Code of 1986 to exclude from gross income capital gains from the sale of certain farmland property which are reinvested in individual retirement plans.

McConnell, Mitch

This bill excludes from gross income the gain from the sale or exchange of qualified farmland property to a qualified farmer that is contributed to an individual retirement account (IRA). This generally&nbsp;prevents the federal capital gains tax from being imposed on such gain. (Conditions apply.)Specifically, the bill excludes from gross income any gain from the sale or exchange of qualified farmland property contributed to an IRA within 60 days of the sale or exchange if&nbsp;<ul><li>the requisite election is made,</li><li>the property is sold to an individual actively engaged in farming (qualified farmer),</li><li>the qualified farmer signs a written agreement consenting to the application of a federal tax if the property is disposed of or no longer used for farming within the first 10 years after the sale or exchange, and</li><li>the written agreement is filed.</li></ul>The bill defines qualified farmland property as real property located in the United States that, for substantially all of the 10 years preceding the sale or exchange, is used by the farmer (or lessee) for farming purposes.However, under the bill, if the qualified farmland property is disposed of or no longer used for farming within the first 10 years after the sale or exchange, a tax is imposed on the qualified farmer equal to the amount excluded from gross income multiplied by&nbsp;the sum of the highest tax rate on adjusted net capital gains and the net investment income tax rate&nbsp;(currently 23.8%), plus interest.