The Internal Revenue Service today issued guidance that provides tax relief for farmers and ranchers in applicable states and regions who sold or exchanged livestock because of drought conditions.
Under the guidance, farmers and ranchers may take more time to replace their livestock and defer tax on any gains from the forced sales or exchanges.
Notice 2025-52 PDF lists the applicable areas, by county or other jurisdiction, that qualify for federal assistance. The list includes 49 states, the District of Columbia and other regions that reported exceptional, extreme or severe drought during the 12-month period ending on Aug. 31, 2025.
The tax relief generally applies to capital gains realized by eligible farmers and ranchers from sales or exchanges of livestock held for draft, dairy or breeding purposes. Sales of other livestock - such as those raised for slaughter or held for sporting purposes – and sales of poultry do not qualify.
Eligible farmers and ranchers must show that drought prompted the sales or exchanges, and that the area received a federal drought designation. Generally, livestock must be replaced within a four-year period, instead of the usual two-year period. The IRS is authorized to further extend this replacement period if the drought persists.
Source : irs.gov