-Farm News photo by Karen Schwaller
Eric Hofland, consultant for Northwest Iowa Farm Business Association in Spencer, spoke to attendees about the One Big Beautiful Bill Act, and how it would impact farm families.

SPENCER — Clarity on tax preparation and planning for 2026 took center stage with the “One Big Beautiful Bill Act” (OBBBA) starting things off at the 41st annual Northwest Iowa Ag Outlook in Spencer.

Eric Hofland, consultant with Northwest Iowa Farm Business Association, briefly outlined the OBBBA, saying it wasn’t “groundbreaking legislation,” as much as it was a continuation of existing rules.

“Before the OBBBA was passed last July, we were (in place) to have a lot of our tax rules set to (the time prior to the) Tax Cuts and Jobs Act (TCJA) legislation that was passed when Trump was in office the first time,” he said.

Hofland explained that under the OBBBA, tax brackets are set to be lowered slightly and that taxpayers who are married and filing jointly could make up to $95,950 and still be in the top of the 12 percent tax bracket.

“The 12 percent tax bracket is a historically cheap rate when you look at the all-time history of the U.S. Tax Code,” he said.

-Farm News photo by Karen Schwaller
A question-and-answer session involving a panel of local tax and legal professionals took place at the 41st annual Northwest Iowa Ag Outlook in Spencer.

Something he said was new this year is a $6,000-per-person senior deduction for those age 65 and older. It runs on a sliding scale of modified adjusted gross income amounts. Those with less than $75,000 can obtain the full deduction; those making up to $175,000 receive partial deductions, and deductions for those making more than $175,000 are phased out.

His example stated that a married couple (ages 67 and 69) with a modified adjusted gross income of $115,000 can reduce that income to $103,000, putting them in the 22 percent bracket, saving them $2,640 in tax dollars.

“It’s not ‘no tax on Social Security’ like we were promised, but it’s certainly a lot better than we’ve had,” he said.

Hofland said the Child Tax Credit was increased to $2,200/child, and it can be indexed for inflation.

He also said the Qualified Business Income Deduction (also involving those who are members of cooperatives and receive 1099s from them) is now permanently set at 20 percent. Following the 2017 TCJA, farmers no longer have to pay wages to claim the benefits it offers, but only have to have net income from the farm, so that 20 percent deduction comes off of taxable income. With that, he said a new $400 minimum deduction has been introduced, which starts in 2026.

-Farm News photo by Karen Schwaller
Attendees of the Northwest Iowa Ag Outlook's session on tax planning were able to visit individually with panelists after the session ended. People were able to get a snapshot of the way changes in tax laws will affect their own tax planning at this session.

Hofland said the estate tax has been adjusted for inflation, allowing families to pass more wealth on to their heirs.

“They made (the amount) permanently higher to $13.99 million for 2025, then to $15 million for 2026, and in 2027 it will be indexed for inflation, but starting out at that higher level,” said Hofland.

He said “Trump Accounts” are part of the OBBBA, which are (in essence) IRA accounts for children under age 18. It consists of a $1,000 one-time federal contribution for those born between Jan. 1, 2025, and Dec. 31, 2028. Family and friends can gift up to $5,000/year (tax-free for an employee as an employer benefit), with no contributions allowed before July 4, 2026, when the program officially begins. Funds are invested in low-cost U.S. stock index funds only, and the account is managed by parents until their child reaches 18, when full control transfers to the child.

Funds grow tax-deferred, and earnings and employer/government contributions are taxed as ordinary income upon withdrawal. A 10 percent penalty may apply if the money is withdrawn before the age of 59.5, unless for qualified exemptions such as college, purchasing a first home, disability, etc.

“This is something they’re trying to incentivize people to do. If you can put in $1,000 now — and if you wait until their full retirement age it could be about $1 million by the time you figure in growth and inflation,” said Hofland, adding that the hope of this program is that people not rely on the government to care for them once they reach retirement age.

Hofland said a child must be born in the U.S. and have a Social Security Number to qualify for this account.

He said there is now a deduction for interest paid on loans for new personal vehicles (not business vehicles) purchased in the U.S. The debt needed to be incurred after Dec. 31, 2024. The limit is up to $10,000 and there is a gradual phase-out based on modified adjusted gross income. The deduction will be in effect through 2028.

Hofland said the 50 percent “meals deduction” ended on Dec. 31, 2025. Beginning in 2026 there will no longer be a deduction for business meals for employees, and meals will remain excludible from an employee’s income.

Bonus depreciation will remain permanent at 100 percent.

“For this year only, they give you a special exclusion where you can choose if you want a 40 percent bonus or if you want to do the 100 percent bonus, but you have to make a special election for this past year only. After that it’s going to be back to 100 percent,” he said.

Hofland said bonus depreciation might be considered if a farmer purchases a machine shed, which is considered “20-year property.” He said it’s the only property that would fall into a category where it could be built and written off all in one year.

“It’s the one case where this bonus is a big deal,” he said.

Hofland said 1099s now will have a higher reporting limit starting in 2026, being raised from $600/payee to $2,000/payee.

He said on the topic of farmland sales, that if property has been held for 10 years, a qualified farmer can choose to pay tax on the gain over four years instead of paying it all on one tax return.

“The calculation on the tax is still done on one tax return, so if you’re going to owe $100,000 on that farm ground, you’re still going to pay $100,000 worth of tax, but you’ll spread it out over four years rather than paying it all in one shot,” said Hofland.

He said most people wait until they get a step-up in basis on land, but in those cases, he said this would be an extra benefit.

Hofland said the 2025 government shutdown caused some people to lose their health insurance, and that in 2026, taxpayers involved are standing at a “cliff.” Currently, taxpayers with incomes at or above 400 percent of the Federal Poverty Level can receive a Premium Tax Credit (PTC) for any amount by which the premium for the second lowest cost silver plan exceeds 8.5 percent of their household income.

His example was of married farmers who are both 60 years of age. The cost of the second lowest cost silver plan to insure them both is $30,000. Their household income is $90,000. He said in 2025 they would qualify for a PTC of $22,350 ($30,000 minus $7,650, which is 8.5 percent of their adjusted gross income, which is what they would have to pay).

“In 2026, because we don’t have the cliff provision anymore and it’s 100 percent payback, (unless Congress extends the enhancements) they would be on the hook for the full $30,000, so they would have to pay back the initial $22,350, which they were not responsible for paying back before 2026,” he said.

Hofland said it’s a “fairly significant change,” and asked attendees to be open with their tax professionals so as to avoid expensive and unexpected taxation bills.