Taxes and Estate Planning

August 17, 2026 by Stephanie Fahrenbruch

What taxes are due when selling farmland?

Selling farmland may result in capital gains tax and, depending on the situation, depreciation recapture or other tax consequences. The amount owed depends on factors such as the property’s adjusted basis, purchase price, improvements, depreciation, ownership structure, and how the land was used. Sellers should consult their CPA or tax professional before selling. AgWest Land Brokers can work alongside your tax advisors to help with the real estate side of the transaction.

What is a 1031 exchange?

A 1031 exchange allows an owner of qualifying investment or business property to potentially defer capital gains taxes by exchanging the property for another qualifying property. Specific rules, timelines, and requirements apply, and not every transaction qualifies. Anyone considering a 1031 exchange should involve a qualified tax advisor and exchange intermediary before selling. AgWest Land Brokers can help identify potential replacement agricultural properties.

Can farmland be inherited tax-free?

Inherited farmland may receive different tax treatment than property sold during the owner’s lifetime, but “tax-free” depends on the circumstances. Federal estate taxes, state taxes, income taxes, and future capital gains can all depend on the property’s value, ownership, and how the property is handled after inheritance. An estate-planning attorney or tax professional should review the specific situation.

What happens to farmland after someone passes away?

When a landowner passes away, the farmland generally becomes part of the person’s estate and is transferred according to their will, trust, beneficiary designations, or applicable state law. The property may be distributed to heirs, sold, placed in a trust, or retained by the family. AgWest Land Brokers can help families understand their real estate options when an inherited property needs to be valued, divided, leased, or sold.

How can families avoid probate?

Families may be able to reduce or avoid probate through estate-planning tools such as trusts, beneficiary designations, joint ownership, or other legal arrangements. The best strategy depends on the family’s assets, goals, and circumstances. Because estate planning is a legal matter, families should work with an estate-planning attorney. AgWest Land Brokers can assist with the farmland and real estate considerations that are part of the plan.

Should farmland be placed in a trust?

A trust can be useful for some farmland owners as part of an estate plan, but it is not the right solution for everyone. Potential benefits can include avoiding or simplifying probate, managing property for beneficiaries, and providing continuity of ownership. Landowners should discuss their specific situation with an estate-planning attorney and tax professional before transferring farmland into a trust.

What is stepped-up basis?

Stepped-up basis generally means that the tax basis of inherited property is adjusted to its fair market value as of the owner’s date of death, subject to applicable tax rules. This can reduce the taxable capital gain if the property is later sold. Because basis rules and exceptions can be complex, heirs should consult a tax professional before selling inherited farmland.

How do property taxes work?

Property taxes are generally based on the assessed value of real estate and the tax rates established by applicable local taxing authorities. Agricultural land may be assessed differently than residential or commercial property, depending on state and local laws. Property taxes are an important ownership expense to consider when buying or evaluating farmland. AgWest Land Brokers can help buyers review available property tax information for a property.

I highly recommend utilizing AgWest Land Brokers and Jeff Moon for the sale of agricultural property. Working with Jeff on the recent sale of our late father’s three farms in Central Nebraska was a very positive experience. Jeff went out of his way to answer all of our questions from when we started researching options on how to sell the farms to the end of the closing process. Jeff’s personal touch and recommendations made what could have been a stressful process seem routine. Many thanks go to Jeff and his team for all the work they did to ensure a successful outcome.

Kent Peterson

Well over a century ago, my great-grandfather purchased land-locked, undevelopable, prone to flooding, wooded land in Kansas to divide up into parcels for each of his many children. After ownership was passed through multiple generations, the land is still growing trees, providing refuge for wildlife, and most is still owned by descendants of my great-grandfather. My small family branch inherited two small pieces of land.

I first spoke with AgWest Land Brokers over two years ago. Since I live in California, I needed a reliable, trustworthy, knowledgeable, patient, boots-on-the-ground kind of agent who could help us learn more about these properties and potentially help us navigate a sale from afar. AgWest Land Brokers were always accessible, responded immediately, never said a question was silly, and always treated us with the utmost respect. If they did not know the answer immediately, they would always find out and promptly reply. Their followthrough was impeccable.

It is safe to say, these two small parcels of land are not particularly valuable and would not build an agent’s resume. However, from our very first conversation, AgWest Land Brokers impressed me with their positive attitude, knowledge of the area, their creativity, openness to explore, and their honest willingness to learn all about these two land parcels. This was not going to be an easy sell. At every turn in the road, they personally uncovered old county records, maps, easements, and steered us to trusted legal advisors, escrow, and title officers. AgWest Land Brokers was always willing to make the “hard” phone calls and constantly negotiated in our best interest.

Recently, the two parcels sold. AgWest Land Brokers worked to complete these sales for over two years and never once made us feel that the size of the properties was not worth their time. I cannot give enough praise and thanks to them for the tireless efforts resulting in happy and very appreciative clients.

Elizabeth SaltzmanCalifornia

We decided AgWest Land Brokers were the best fit to market our 98 acres. They were always available by phone, text, email and personal visits to assure us in our decision and to answer any and all questions. In our case, we had three co-owners, so they were fielded questions from all of us in a prompt and considerate manner.

In addition to our agent, we were extremely impressed with the marketing of our land. My top marketing favorite was the online drone video of the land. The video really captured the uniqueness of our property we had always appreciated.

I would not hesitate to list with AgWest Land Brokers again. Honestly, I don’t know how our land sale could have been promoted any better.

Marvin NethNebraska

My wife and I found the AgWest Land Brokers and in particular, Jeff Moon, to be most cooperative, friendly, and informative during the whole process of selling some of our farmland. While it was and is a difficult time with crop prices, land taxes, and other farm expenses to sell farmland it was an arduous time to find just the right buyer, but Jeff hung in there until a buyer was found and the entire selling process completed. We would recommend AgWest Land Brokers and Jeff Moon to anyone considering selling or buying property.

Jerry & June DenkingerNebraska

I can’t say enough good things about my experience with Bryan. From the very beginning he made me feel at ease and answered all my questions and concerns. Even though I was a little hesitant on selling my farm, he reassured me that the process would be simple. He went above and beyond all my expectations. He contacted many potential buyers in a short period of time because he knew I didn’t want this sale to be a long, drawn-out process. He was prompt and professional and got me the price I wanted. He was by my side from the beginning to the very end and I couldn’t have gone through all this without him! He’s GREAT!

Trecy Mitchell