Skip to content
Get started
Get started
DEEPYIELDTAX STRATEGIES

How Estimated Tax Works for Farmers and Ranchers

Short answer: If at least two-thirds of your gross income comes from farming, the IRS gives you a simpler estimated tax rule than other self-employed people get. You don't make four quarterly payments. You make one payment by January 15 of the next year. Or you skip estimated tax entirely if you file your return and pay all the tax you owe by March 1. The catch is the two-thirds test itself. It counts your spouse's income on a joint return, and some farm-related income, such as gains from selling farmland, doesn't count as farm income. Your CPA can run the test on your actual return lines.

Request your free two-year look-back →

1. Who counts as a qualified farmer

Publication 225 (2025) says an individual is a qualified farmer for 2025 if at least two-thirds of their gross income from all sources for 2024 or 2025 was from farming. Publication 505 states the same test for 2026: two-thirds of your gross income for 2025 or 2026. Either year can qualify you.

The test compares two totals from your return:

  • Gross income from all sources. These are income amounts, not losses: wages, interest, dividends, gross business income from Schedule C, capital gains (losses aren't netted against gains), gains on sales of business property from Form 4797, retirement income and social security benefits that are taxable, gross rents and royalties from Schedule E, gross farm rental income from Form 4835, gross farm income from Schedule F, your share of gross income from a partnership or S corporation, and other income.
  • Gross income from farming. This is gross farm income from Schedule F, gross farm rental income from Form 4835, gross farm income from Schedule E Parts II and III, and gains from selling livestock used for draft, breeding, sport or dairy purposes reported on Form 4797.

Divide the farming total by the all-sources total. If the result is at least two-thirds, the farmer rules below apply.

2. What doesn't count as farm income

Publication 225 says farm income does not include:

  • Wages you receive as a farm employee.
  • Income from contract grain harvesting and hauling with workers and machines you furnish.
  • Gains you receive from the sale of farmland.

Publication 505 adds that wages you receive from a farm corporation are not gross income from farming.

Those items still count in your gross income from all sources. So a year with a farmland sale, or a year when you're paid wages by your own farm corporation, can move the ratio.

3. Joint returns: your spouse's income counts

Publication 225 says that on a joint return, you must add your spouse's gross income to your gross income. If one spouse farms and the other has a salary, or a practice, or a business, the salary counts in the all-sources total. That can put a farm family below two-thirds even when the farm is the main operation. If you're below the line, the general estimated tax rules apply instead (section 5).

4. The farmer rules: one payment, or none

If you're a qualified farmer, Publication 505 says you have only one payment due date for your 2026 estimated tax: January 15, 2027. The April, June and September due dates don't apply to you.

You have three ways to be done:

  • File and pay by March 1. If you file your 2026 Form 1040 or 1040-SR by March 1, 2027, and pay all the tax you owe at that time, you don't need to make an estimated tax payment.
  • Withholding covers it. Publication 225 says you don't have to pay estimated tax if your income tax withholding will be at least 66 2/3 percent of the total tax on your current-year return or 100 percent of the total tax on your prior-year return.
  • One payment by January 15. If you must pay, you make one payment, your required annual payment. It's the smaller of 66 2/3 percent of your total tax for the year or 100 percent of the total tax shown on your prior-year return. The prior-year return must cover all 12 months.

When a due date falls on a Saturday, Sunday or legal holiday, the next business day applies. That's why Publication 225 shows March 2, 2026 for the 2025 return. Publication 505 also covers farmers on a fiscal year: the dates run from the end of your tax year instead.

5. How the general rules compare

For everyone else, the IRS estimated taxes page says you generally don't have to pay estimated tax if you'll owe less than a small threshold amount after withholding and credits, or if you paid at least 90 percent of the current year's tax or 100 percent of the prior year's tax, whichever is smaller. The year is divided into four payment periods, each with its own due date.

Publication 505 adds a higher-income rule. If your prior-year AGI was above the threshold Publication 505 sets for your filing status, you substitute 110 percent for 100 percent in the prior-year test. Publication 505 says that rule doesn't apply if at least two-thirds of your gross income is from farming. A qualified farmer uses 100 percent of the prior year's tax regardless of AGI.

6. Underpayment penalty and Form 2210-F

Publication 225 says if you don't pay all your required estimated tax by January 15, or file your return and pay any tax due by March 1 (March 2, 2026 for the 2025 return), you may owe a penalty. Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishers, is how a farmer figures it.

The Form 2210-F instructions say that unless you check box A or B in Part I, you don't need to figure the penalty or file the form. The IRS will figure it and send a bill if you owe one.

The instructions list two waivers. One is for an underpayment due to a casualty, disaster or other unusual circumstance, where it would be inequitable to impose the penalty. The other is for a taxpayer who retired after reaching age 62 or became disabled in the relevant years, where the underpayment was due to reasonable cause and not willful neglect. To ask for one, you check box A, complete the form and attach a statement explaining why you couldn't meet the requirements.

Publication 225 also says that if you get a penalty notice you think is wrong, don't ignore it. Write to the address on the notice, explain why, and include a computation showing you met the gross income from farming requirement.

7. Selling farmland to a farmer: the section 1062 election

Publication 505 and the 2026 Form 1040-ES instructions describe a newer rule. If you sold or exchanged qualified farmland to a qualified farmer, you can elect under section 1062 to pay the net income tax on the sale in four equal installments. When that election is properly made, the IRS will waive the portion of the estimated tax penalty that comes from the sale. For the year of the sale, Publication 505 says you may exclude 75 percent of that tax when figuring your required annual payment, and you include the 25 percent paid with the return. Form 1062 and its instructions, and Notice 2026-3, have the details. Whether a sale qualifies is a question for your CPA.

8. What to bring to your CPA

  • Last year's return and this year's income to date, by source (Schedule F, Form 4835, Form 4797, Schedule E, wages, K-1s).
  • Your spouse's income for the year, if you file jointly.
  • Any farmland sale, contract harvesting income, or wages from a farm corporation.
  • Withholding to date on any wages, pensions or social security.
  • Whether you plan to file and pay by March 1, or make the January 15 payment.

Where DeepYield fits

DeepYield is a second set of eyes, not a replacement for your CPA. A free two-year look-back is a review of your last two years of tax returns, done for you, then a 30-minute call to walk through what we found. For a farm, that review includes the lines that drive the two-thirds test: what was reported as farm income, what was reported elsewhere, and how a spouse's income or a land sale sat next to it. We go looking for what's missing, and what we find can go to your CPA too. Sometimes the review ends with nothing to change.

Related: Year-End Tax Planning for Farmers and Ranchers · Ranch Business or Hobby? · Selling Farmland to a Farmer: The Section 1062 Election to Pay the Tax in Installments

Request your free two-year look-back →

Frequently asked questions

Do farmers have to make quarterly estimated tax payments?

Not if they're qualified farmers. If at least two-thirds of your gross income for the current or prior year is from farming, Publication 505 says you have only one payment due date: January 15 of the next year. The April, June and September due dates don't apply.

What is the two-thirds rule for farmers?

It's the test for the farmer estimated tax rules. Divide your gross income from farming by your gross income from all sources. If farming is at least two-thirds in either the current year or the prior year, you're a qualified farmer. Gross income means income amounts, not losses, and on a joint return it includes your spouse's income.

Can a farmer skip estimated tax by filing early?

Yes. Publication 505 says that if you file your 2026 Form 1040 or 1040-SR by March 1, 2027, and pay all the tax you owe at that time, you don't need to make an estimated tax payment. When March 1 falls on a weekend or legal holiday, the next business day applies.

How much does a qualified farmer have to pay by January 15?

The required annual payment is the smaller of 66 2/3 percent of your total tax for the year or 100 percent of the total tax shown on your prior-year return, which must cover all 12 months. The 110 percent rule for higher-income taxpayers doesn't apply to qualified farmers.

Does selling farmland count as farm income for the two-thirds test?

No. Publication 225 says farm income does not include gains from the sale of farmland. The gain still counts in your gross income from all sources, so a land sale can move the ratio. Gains from selling livestock used for draft, breeding, sport or dairy purposes do count as farm income.

Does my spouse's salary count against the two-thirds test?

Yes, on a joint return. Publication 225 says you must add your spouse's gross income to yours. A salary counts in the all-sources total but not in the farming total.

What is Form 2210-F?

It's Underpayment of Estimated Tax by Farmers and Fishers. A farmer uses it to figure an underpayment penalty or to request a waiver. Its instructions say that unless you check box A or B in Part I, you don't need to file it; the IRS will figure any penalty and send a bill.

Sources

Results depend on your specific facts. No outcome is guaranteed. This is general information, not tax advice; advice is provided only under a signed engagement.

DeepYield LLC · 4306 Yoakum Blvd, Suite 170, Houston, TX 77006