Beginning Farmer Tax Deduction Program
Description
A farm owner who sells farmland to a beginning farmer on or after August 28, 2023 may subtract from his/her Missouri adjusted gross income, to the extent included in federal adjusted gross income, an amount equal to the portion of capital gains received from the sale of such farmland that such farm owner receives in the tax year for which such owner subtracts such capital gain according to the following:
Capital Gain Amount:
The first $0 - $2 million
The next $1,000,000 ($2,000,001 - $3,000,000)
The next $1,000,000 ($3,000,001 - $4,000,000)
The next $1,000,000 ($4,000,001 - $5,000,000)
The next $1,000,000 ($5,000,001 - $6,000,000)
Percentage of Capital Gains Deduction:
100% deductible
80% deductible
60% deductible
40% deductible
20% deductible
A farm owner who rents, leases, or enters into a crop-share arrangement (not exceeding 10 years) with a qualified beginning farmer can reduce his/her Missouri adjusted gross income (cash rent income, in the case of a lease) equal to the amount of income received by the farm owner under the agreement, to the extent included in federal adjusted gross income, up to $25,000 per tax year.
Who is Eligible?
A Beginning Farmer is a taxpayer who:
Has filed at least one but not more than ten Internal Revenue Service Schedule F (Form 1040) Profit or Loss from Farming forms since turning eighteen years of age; or
Is approved for a beginning farmer loan through the USDA Farm Service Agency Beginning Farmer direct or guaranteed loan program; or
Has a farming operation that is determined by the department of agriculture to be new production agriculture but is the principal operator of a farm and has substantial farming knowledge; or
Has been determined by the Missouri Department of Agriculture to be a qualified family member.
A Farm Owner is “an individual (including an entity that is disregarded, for tax purposes, as separate from the individual) who owns farmland and disposes of or relinquishes use of all or some portion of such farmland as follows:
- A sale to a beginning farmer; or
- A lease or rental agreement not exceeding ten years with a beginning farmer; or
- A crop-share arrangement not exceeding ten years with a beginning farmer.
A Qualified family member is “an individual who is related to a farm owner within the fourth degree by blood, marriage, or adoption and who is purchasing or leasing or is in a crop-share arrangement for land from all or a portion of such farm owner’s farming operation.”
Missouri Ethics Commission Relationship Chart
How Does the Program Work?
The Authority will verify the information provided with the application form and provide a dated certification letter to the Farm Owner. The Beginning Farmer and the Missouri Department of Revenue will also be provided a copy of the certification, but to receive the deduction, it is the responsibility of the Farm Owner to provide the certification to the Missouri Department of Revenue when filing their tax return. (Form MO-5955)
In the case of a multi-year rental, lease or crop-share arrangement, the certification will be valid for 12 months from the issuance date. To certify a multi-year rental, lease agreement or a crop-share arrangement is still in effect, a verification form (available from the Authority) signed by both the beginning farmer and farm owner, must be submitted to the Authority on an annual basis. Upon receipt of the verification form, a certification renewal good for 12 months will be issued to the farm owner.
A Contingent Certification letter may be issued to the Farm Owner prior to the actual sale of the farmland, if all documentation from both the Beginning Farmer and Farm Owner are provided with the application (including the application fee), with the exception of the real estate settlement statement. Once the closing documentation is received, the Certification will be approved and provided to the Beginning Farmer, Farm Owner, and the Missouri Department of Revenue.
Fees:
Application/Certification fee for the purchase of farmland: $300
Application/Certification fee for a rental/lease/crop share arrangement: $200
Annual Certification fee (for lease or crop-share arrangements extending more than one year): $100