Selling farmland means pulling together agriculture-specific records, picking a sale method that matches your price and timeline goals, signing a purchase agreement that handles crop rights and mineral reservations, and closing through a title company or escrow agent. The tax bill can be substantial: federal long-term capital gains rates reach 20%, a 3.8% surtax may apply on top of that, and depreciation you claimed on farm improvements gets recaptured at up to 25%. Farm sales also carry wrinkles residential deals rarely have, including active Conservation Reserve Program contracts, sitting tenants, and a chemical-application history that buyers will want documented.
Documents to Gather Before You List
Start with the legal property description and a boundary survey, both accessible through the county clerk or recorder. These records fix the exact perimeter using metes and bounds and reveal encroachments or disputes. If the recorded survey is old or missing, hire a licensed surveyor. Budget at least $1,000 to $3,000 for a rural boundary survey, and more for larger parcels.
Buyers will ask for soil productivity data, especially the National Commodity Crop Productivity Index ratings from the USDA Web Soil Survey. Those ratings drive per-acre value.1Natural Resources Conservation Service. Web Soil Survey A professional agricultural appraisal, typically $1,500 to $4,000, converts that soil data into a defensible market value and gives the buyer’s lender something to work from.
In states that regulate groundwater, pull your water rights documentation and irrigation permits. Those transfer with the land only if properly documented. Also request tax records and drainage assessment history from the county treasurer so buyers can see annual carrying costs and the condition of local drainage infrastructure.
USDA and Conservation Reserve Program Records
If any acres are enrolled in a USDA program, get the certificates from your local USDA Service Center. The Farm Service Agency keeps records for base acreage, crop history, and active Conservation Reserve Program contracts.2Farmers.gov. Get Started at Your USDA Service Center CRP contracts matter because they carry annual payments and use restrictions that bind the next owner. If the buyer does not assume the CRP contract within 60 days of the transfer, you as the original contract holder are in violation, forfeit future payments, and may owe repayment of past payments with interest plus a penalty.3Farm Service Agency. CRP Landowner Bill of Rights Disclose active contracts up front.
Environmental Site Assessment
Most buyers, and nearly every lender, will require a Phase I Environmental Site Assessment before closing. It looks for contamination from pesticide use, fuel tanks, waste oil, heavy metals, and other hazards common on working farms. The Phase I is also how the buyer preserves the innocent landowner defense under federal environmental liability law, which requires “all appropriate inquiries” into prior ownership and uses before acquisition.4eCFR. Title 40 CFR Part 312 – Innocent Landowners, Standards for Conducting All Appropriate Inquiries If any portion of the land has a history of chemical application, underground tanks, or industrial use, expect the assessment to be a condition of sale.
Choosing a Sale Method
The method you pick controls how the market meets your property and how the final number is set. Commissions for farmland generally fall between 2% and 6% of the sale price, depending on the method and the professionals involved.
- Absolute auction. The land sells to the highest bidder on a set date, regardless of price. Strong urgency, no floor.
- Reserve auction. You set a minimum. The high bid is an offer until you accept it.
- Private treaty. Direct negotiation with one or more buyers, usually through a broker. More time and flexibility, and often a lower price than a competitive bidding format.
- Sealed bid. Written offers by a deadline, opened together. You pick the best terms without live-auction pressure.
- Online platforms. Digital auctions run over several days and reach a wider buyer pool than a local in-person sale.
Working With a Land Specialist
Farmland deals go better with an agent who works agricultural property rather than houses. Look for the Accredited Land Consultant designation, which requires specialized education and documented transaction volume. A land specialist can price against comparable agricultural tracts rather than residential comps and can market to the right audience: institutional investors, neighboring operators, and conservation buyers.
What the Purchase Agreement Must Cover
The purchase agreement is the binding contract for every detail of the deal. State bar associations and agricultural realtor boards publish standardized agricultural forms, and using one helps ensure the farm-specific issues are addressed. The document must correctly identify both parties and carry the full legal description from the current deed.
Crop Rights During the Growing Season
If the sale closes during the growing season, the contract has to say who harvests the standing crop and how proceeds are split. This is one of the most negotiated provisions in a farmland deal. In many states, a tenant or outgoing owner who planted a crop before termination has a legal right to harvest it, a principle sometimes called the doctrine of emblements. Spell it out in the agreement rather than leaving it to default rules.
Mineral, Timber, Wind, and Solar Rights
Subsurface minerals, timber, and wind or solar rights can transfer with the land or be reserved. They can carry real value on their own, especially in areas with oil, gas, or renewable-energy development. State plainly which rights are included and which you are keeping. If you reserve mineral rights, the buyer’s lender will want the reservation disclosed and may adjust financing.
Fixtures and Improvements
List every fixture the buyer is getting: center pivots, grain bins, permanent fencing, barns, other attached improvements. Items you leave off the list can turn into post-closing arguments. If you plan to remove equipment before closing, put that in the agreement too.
Earnest Money
Earnest money on farmland typically runs 1% to 10% of the price, held in third-party escrow until closing. A larger deposit signals a serious buyer and strengthens the offer in competitive situations. If the buyer breaches, you may keep the deposit as liquidated damages, subject to whatever the contract says about forfeiture.
Federal Taxes on the Sale
Taxes can eat a large share of your proceeds if you do not plan before you sign. Federal capital gains tax, a possible surtax, and depreciation recapture each operate under different rules.
Long-Term Capital Gains
Hold the land more than a year and your profit is taxed at long-term capital gains rates rather than ordinary rates. For 2026, the federal brackets are:
- 0% on taxable income up to $49,450 (single) or $98,900 (married filing jointly).
- 15% from those thresholds up to $545,500 (single) or $613,700 (married filing jointly).
- 20% above those amounts.
Those thresholds come from IRS Revenue Procedure 2025-32.5Internal Revenue Service. Revenue Procedure 2025-32 Your gain is the sale price minus your adjusted basis, which is generally what you paid plus the cost of permanent improvements minus any depreciation you claimed.
The 3.8% Net Investment Income Tax
If your modified adjusted gross income tops $200,000 single or $250,000 married filing jointly, you may also owe a 3.8% net investment income tax on the gain. It applies to investment real estate, including farmland you do not materially participate in operating. The thresholds are not indexed and have not changed since the surtax took effect.6Internal Revenue Service. Questions and Answers on the Net Investment Income Tax Stacked with the 20% top rate, the effective federal ceiling on farmland gains reaches 23.8%.
Depreciation Recapture
If you took depreciation deductions on farm buildings, irrigation systems, or other improvements, the IRS recaptures some of that depreciation as ordinary income when you sell. For depreciable real property, the Section 1250 recapture is generally taxed at a maximum 25%, higher than the standard long-term capital gains rate.7Office of the Law Revision Counsel. 26 USC 1250 – Gain From Dispositions of Certain Depreciable Realty Bare land is not depreciable, so it is not subject to recapture, but the improvements are.
Deferring the Tax With a 1031 Exchange
A like-kind exchange under Section 1031 defers capital gains tax when you reinvest proceeds into another qualifying property held for productive use in a trade or business or for investment. Farmland exchanged for other farmland, ranchland, or even commercial real estate can qualify.8Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use in a Trade or Business or for Investment Two hard deadlines apply:
- 45 days to identify potential replacement properties in writing after the sale.
- 180 days to close on the replacement, or by the due date (with extensions) of that year’s tax return, whichever comes first.
A qualified intermediary must hold the sale proceeds. You cannot touch the money at any point. Property held primarily for sale, such as farmland you subdivided and marketed as residential lots, does not qualify.
Spreading Tax With an Installment Sale
If the buyer pays you over multiple years rather than in a lump sum, the deal may qualify for installment reporting under Section 453. You recognize gain as payments come in, spreading the tax across the payment period instead of concentrating it in the year of sale.9Office of the Law Revision Counsel. 26 USC 453 – Installment Method Installment reporting is the default when at least one payment arrives after the close of the sale year, but you can elect out on your return if you would rather recognize all gain immediately.
Handling a Sitting Tenant
If your land is leased, the lease does not end just because you sell. A valid lease generally survives the change of ownership, and the buyer steps into your role as landlord. Trying to end a lease early to market the property without an active tenant can be a breach of contract unless the lease itself contains a termination-for-sale clause.
Disclose every active lease before buyers make offers. They need the term, rate, expiration, and any right of first refusal the tenant holds. Year-to-year arrangements without a fixed end date typically require written notice, often three to six months, before the tenancy can be terminated. Leases for a set term usually end on their own without notice.
Crop rights again deserve attention. A tenant who planted before closing may have a legal right to harvest even after title changes hands. Handle it in the purchase agreement so the buyer and the outgoing tenant do not end up fighting about it later.
If the Buyer Is a Foreign Person
Foreign individuals, foreign corporations, and entities with substantial foreign ownership trigger federal reporting under the Agricultural Foreign Investment Disclosure Act. The buyer must file Form FSA-153 with the local Farm Service Agency office within 90 days of acquiring the interest.10Office of the Law Revision Counsel. 7 USC Chapter 66 – Agricultural Foreign Investment Disclosure The report includes the buyer’s legal name, citizenship, legal description and acreage, and purchase price. The filing obligation is the buyer’s, but the requirement can affect closing timelines, so sellers should know it exists.
The Closing
Once the agreement is signed, an escrow agent or title company runs the flow of funds and legal verification. The title company searches public records and issues a title commitment listing existing liens, easements, and other encumbrances. If the search turns up problems, such as an unreleased mortgage or a boundary dispute, they have to be cleared before closing can proceed.
The Deed and Recording
You sign a deed transferring ownership. Two forms are common: a warranty deed, which guarantees clear title and commits you to defend against future claims, and a quitclaim deed, which transfers only whatever interest you actually have. Buyers and lenders strongly prefer warranty deeds. The deed must be notarized, and some states require additional witnesses.
The signed deed is filed with the county recorder or registrar of titles to update the public record. Recording fees are usually modest and often based on page count. Roughly three dozen states plus the District of Columbia also charge a real estate transfer tax at closing, calculated as a percentage of the sale price and ranging from under 0.1% to 2%. Ask your closing agent or attorney whether the tax applies in your state and who pays it.
Getting Paid
After recording, the escrow agent wires or writes you the proceeds, minus the broker’s commission, title insurance premiums, prorated property taxes, and any outstanding liens. Possession transfers on the date named in the purchase agreement, which may be the closing date or a later date the parties negotiated. Once the deed is recorded and the money is distributed, both parties’ obligations under the agreement are complete.