How the OBBBA Is Reshaping Agribusiness

The One Big Beautiful Bill Act, commonly referred to as the OBBBA or OB3, remains a sweeping piece of legislation that brings significant changes to the financial and operational landscape of American agribusiness. For farm business owners, understanding and leveraging these changes can unlock new opportunities for growth, succession planning and risk management.

One of the most impactful provisions of the OBBBA is the restoration of 100% bonus depreciation. This allows farm businesses to immediately expense the full cost of new and used equipment, machinery and certain farm structures. The new provision is for assets acquired after January 19, 2025. Whether you’re upgrading irrigation systems or investing in precision ag tech, this change dramatically improves short-term cash flow post-investment. Furthermore, the Section 179 deduction limit has been increased to $2.5 million, with a phaseout threshold of $4 million. This expanded threshold enables small and mid-sized farms to make substantial capital investments with immediate deductibility.

For the first time in history, real property, specifically Qualified Production Property (QPP), can be eligible for 100% bonus depreciation as opposed to the traditional 39- year depreciation. QPP must be non-residential property with the primary function of manufacturing, producing or refining tangible personal property. For agricultural businesses, this could include on-farm processing facilities (e.g. turning raw materials into finished food products). Construction of QPP must begin after January 19, 2025, and before January 1, 2029, and the property must be placed in service before January 1, 2031. QPP could include new barns and machine sheds, building components and integrated systems (like HVAC in a processing facility) tied directly to the production function.

The OBBBA also extends the Qualified Business Income (QBI) deduction, which is especially beneficial for farms structured as pass-through entities and sole proprietorships. This extension enables eligible farm owners to continue deducting up to 20% of their qualified business income, thereby reducing overall tax liability to the owners, and enhancing net profitability.

For sales of qualified farmland to a qualified farmer in tax years beginning after July 4, 2025, the OBBBA allows taxpayers who recognize gain on the sale to elect to pay the net income tax attributable to that gain in four equal, annual installments with a goal to preserve family farmland and support rural economies by offering a tax deferral mechanism for farmers selling land to other active farmers.

Qualified farmland property is U.S. real property that either has been:

In addition, it must be agreed upon by the buyer that the property limits its use to farming for at least 10 years after the sale or exchange

The OBBBA permanently increases the federal estate tax exemption to $15 million per individual and $30 million for married couples, effective January 1, 2026, indexed for inflation. This is a game-changer for family farms, making it easier to pass land and assets to the next generation without triggering burdensome estate taxes.

Farm businesses engaged in research and experimental (“R&E”) activities, from testing new crop varieties to experimenting with regenerative practices, can now fully expense these costs in the year incurred for taxable years beginning after December 31, 2024. This is a significant change from IRC §174, which required domestic R&E to be capitalized over a five-year period for taxable years beginning after December 31, 2021. For the 2025 taxable year, this will allow taxpayers to choose to immediately expense R&E, amortize the R&E over a 60-month period starting when the taxpayer first realizes benefit, or amortize R&E expenditures over a 10-year period.

In addition, for taxpayers that have a 3-year average of gross receipts less than $31 million, if a tax liability existed in the 2022, 2023 or 2024 taxable year, there is an opportunity to amend the returns and apply the full deduction related to R&E previously capitalized.

The OBBBA represents a rare alignment of tax policy, agricultural support and long-term planning tools. For farm business owners, it’s not just a legislative update; it’s a strategic opportunity. Understanding the OBBBA’s provisions can help you make informed decisions that strengthen your business for years to come.