The IRS has announced that it is extending tax relief for farmers and ranchers in drought-stricken regions of the country.
“Under the guidance, farmers and ranchers may have an extended period of time to replace their livestock and defer tax on any gains from the forced sales or exchanges,” the agency stated.
This deferral is designed to mitigate the financial burden on those who had to reduce their herds under involuntary circumstances caused by the drought. Farmers and ranchers who have already sold livestock due to drought and were facing tax obligations on those sales can now use this extended timeline to replace livestock without facing immediate tax consequences, offering some reprieve amid challenging conditions.
The relief is limited to livestock held for draft, dairy, or breeding purposes. Livestock raised for slaughter or held for sporting purposes, as well as poultry, do not qualify for the tax deferral.
The extension applies to farmers and ranchers across 41 states, the District of Columbia, and U.S. territories such as Guam and the Marshall Islands. The relief is extended to areas that experienced “exceptional, extreme, or severe drought” as determined by the National Drought Mitigation Center between Sept. 1, 2023, and Aug. 31, 2024.
In effect, the extension means that livestock must generally be replaced within four years instead of the usual two years before any capital gains tax falls due. The IRS noted that it might further extend the replacement period if the drought continues.
The extended relief comes as parts of the country continue to face prolonged and severe drought.
While recent rainfall brought relief to parts of the central and southern Plains, northern High Plains, and the middle Mississippi Valley, large sections of the upper Midwest, Northeast, and the Southeast interior saw increased dryness.
Nearly 45 percent of U.S. rangeland and pastures were rated as being in very poor to poor condition as of Sept. 22, a significant rise from the 19 percent recorded in the early summer.
