IRS Extends Tax Relief for Farmers and Ranchers Affected by Drought

Severe drought conditions continue to strain America’s agricultural sector. In response, the IRS has extended special tax relief for farmers and ranchers who were forced to sell or exchange livestock due to drought. This extension announced in IR-2025-93 provides flexibility in managing taxable gains and helps producers preserve capital during hardship.

What Happened

• The IRS has expanded eligibility for relief to farmers and ranchers in 49 states and multiple U.S. territories impacted by drought.

• Qualifying taxpayers who sold livestock because of drought may defer recognition of capital gains by replacing the livestock within a longer period than normally allowed.

• Relief generally applies to sales of livestock held for draft, dairy, or breeding purposes.

• The new guidance extends deferral timelines into 2026 or later, depending on local drought conditions recognized by the National Drought Mitigation Center.

  
  

Why It Matters

1. Cash Flow Relief: Producers avoid immediate tax on forced sales, helping them reinvest in herds once conditions improve.

2. Disaster Flexibility: The IRS recognizes that prolonged drought disrupts normal operations beyond a single year, making multi-year relief essential.

3. Tax Planning Opportunity: Advisors can guide clients on properly documenting sales, drought impacts, and future replacements to secure the deferral.

   
   

Implications for CPAs and Advisors

• Identify Eligible Clients: Review whether clients sold livestock in drought-designated counties.

• Filing Considerations: Ensure deferrals are properly elected on returns and documentation aligns with IRS requirements.

• Strategic Planning: Work with clients to time repurchases or replacements within the deferral window, balancing operational needs with tax efficiency.

  
  

Looking Ahead

With climate volatility increasing, IRS disaster-related relief is likely to become more frequent. Farmers and ranchers should proactively coordinate with their tax advisors to maximize these opportunities, protect liquidity, and plan for eventual herd replacement.

Stay Ahead of Agricultural Tax Relief

Tax rules for disaster relief are highly specialized and missing them can cost thousands.

👉 Try Bizora today to track IRS guidance in real time and help your clients navigate tax planning during crisis conditions.