Farm Tax Guide: Federal & New York Tax Breaks

Farming comes with some of the most useful tax breaks available to any small business, at both the federal and state level. This guide pulls the main ones together in one place so you know what to ask your tax preparer about. Several of these changed recently, so it’s worth reviewing even if you’ve been farming for a while.

This page shares general information, not tax advice. Tax rules change, so confirm the details for your situation with a CPA or tax professional.

Federal tax breaks

IRS Publication 225: Farmer’s Tax Guide

The IRS updates Publication 225 every year. It explains how federal tax rules apply to farm businesses, including what counts as farm income, which expenses you can deduct, how depreciation works, and what records to keep. If you only read one tax document, make it this one. Read Publication 225 on IRS.gov →

Section 179 expensing: up to $2.5 million

Section 179 lets you deduct the full cost of qualifying equipment and other business property in the year you put it into service, instead of spreading it over several years. Under the 2025 federal tax law, the limit rose to $2.5 million, up from $1.25 million, starting with tax years that begin after December 31, 2024. The deduction starts phasing out once your qualifying purchases for the year pass $4 million and disappears entirely at $6.5 million.

100% bonus depreciation, now permanent

Bonus depreciation was permanently reset to 100% for qualifying property acquired after January 19, 2025. It applies to assets with a recovery period of 20 years or less, which covers most farm machinery and equipment, many farm buildings, and breeding livestock. Unlike Section 179, bonus depreciation has no dollar cap.

Other federal changes worth knowing

Estate and gift tax exemption: starting January 1, 2026, the exemption is $15 million per person ($30 million per married couple), made permanent and indexed for inflation. This matters for farm succession planning.
Qualified business income deduction: the 20% deduction for sole proprietors and pass-through businesses is now permanent.

For a full summary of the farm provisions, see the University of Nebraska’s breakdown →

New York State tax breaks

Farm building exemption, extended to 2029

Under Real Property Tax Law Section 483, new or reconstructed agricultural buildings are exempt from the property tax increase their construction would otherwise cause, for ten years. The exemption has been extended through January 1, 2029. You apply through your local assessor, generally before the taxable status date in the year after construction. Read the extension announcement →

Nine state incentives for farm businesses

Sales tax exemptions and refunds: farms can buy machinery, equipment, supplies, vehicles, building materials, and utilities used in production without paying sales tax, and can reclaim some fuel taxes.
Farmers’ School Tax Credit: a credit against the school property taxes you pay on qualified farmland.
Investment Tax Credit: a credit based on the cost of qualifying machinery, equipment, and buildings you put into service.
Farm Workforce Retention Credit: a per-employee credit for farm workers employed at least 500 hours a year.
Farm Employer Overtime Credit: a credit that offsets overtime paid to farm employees.
Farm Donations to Food Pantries Credit: a credit equal to a share of the value of farm products you donate to food pantries.
Farm building exemption: the ten-year property tax break described above.
Excelsior Jobs Program credits: for farms creating five or more net new jobs.
Alcoholic beverages tax exemption: for farm products used in making beverages.

For details on each, see this roundup of all nine incentives → and the official overview from NYS Agriculture & Markets →