Farmland Deduction FAQs

A farm owner can receive a deduction of a set percentage of their capital gains received from the sale of farmland, or the dollar amount not to exceed $25,000 of capital gains received from the rental, lease, or crop-sharing agreement for their farmland, if it is sold, rented, leased, or crop-shared to a beginning farmer. See Section 143.121.10 RSMo.

To qualify for this deduction you must file the Missouri Beginning Farmer Tax Deduction Certification Application, Form BFC, with the Missouri Agricultural and Small Business Development Authority (MASBDA) signed by both the farm owner and the beginning farmer. Once MASBDA has validated that the sale, rental, lease, or crop-sharing agreement to a beginning farmer qualifies, a certificate will be provided to the farm owner and the beginning farmer.

Once the Missouri Agricultural and Small Business Development Authority (MASBDA) has validated that the sale, rental, lease, or crop-sharing agreement to a beginning farmer qualifies, a certificate will be provided to the farm owner and the beginning farmer. To calculate the deduction amount, complete Form 5884 and attach it to your Missouri individual income tax return, along with the certificate from MASBDA, a copy of your federal return, and associated federal schedules.

The deduction only applies to capital gains received from the sale, rental, lease, or crop-sharing agreement received on or after August 28, 2023, and can be claimed on the 2023 individual income tax return. You must obtain a certificate from the Missouri Agricultural and Small Business Development Authority (MASBDA) validating that the sale, rental, lease, or crop-sharing agreement to a beginning farmer qualifies. If you obtain the certificate from MASBDA after you have filed your 2023 individual income tax return, you must amend your return to claim the deduction.

Capital gains from the sale of farmland to a beginning farmer are limited based on the following amounts and percentages:

• the first $2,000,000 of capital gains included in the federal adjusted gross income is 100% deductible;
• the next $1,000,000 included is 80% deductible;
• the next $1,000,000 included is 60% deductible;
• the next $1,000,000 included is 40% deductible; and
• the next $1,000,000 included is 20% deductible.

Capital gains resulting from a rental, lease, or crop-sharing agreement of farmland to a beginning farmer, is limited to $25,000