Beginning farmer tax credits offered in some states

Over the past several decades, family farms (and by extension rural communities) have become more and more endangered. A number of states, including Nebraska and Iowa, have begun to address the difficulties associated with entering farming or ranching as a career way of life.

The greatest barrier to beginning farmers or ranchers is financial – basically a lack of capital (or access to capital). Farmland slated for transition to a new generation is often swallowed up by very large producers. Their access to liquid capital (due in large measure to government payments) drives prices beyond a beginner’s ability to compete for land or access to land.

As fewer and fewer family farms/ranches operate in Nebraska and Iowa and other states, rural communities and small businesses see their customer base dwindle. The result is fewer consumers, fewer taxpayers, fewer jobs, and fewer opportunities for people to remain in or move to rural areas of the country.

Nebraska and Iowa have implemented tax programs designed to encourage retiring landowners to work with persons wishing to enter farming/ranching. Stabilizing or increasing the number of family farmers/ranchers helps rural communities increase economic activity, broaden the tax base, and increase the number of taxpayers and jobs.

In Nebraska, the tax credit incentive to landowners who rent to qualified beginning farmers/ranchers was increased to 10% of rental income for cash rentals and 15% of the cash equivalent of share rentals. Share rentals typically provide for sharing of expenses and risks between the landowner and the tenant. They are especially beneficial to beginning farmers/ranchers, but result in somewhat greater risks for the landowners.

To be eligible, a beginning farmer/rancher in Nebraska cannot have a net worth above $200,000 (up from $100,000 in the original 1999 legislation). The beginner must also be a legal resident, demonstrate adequate farming or livestock production experience, and provide a majority of the day-to-day physical labor and management of the operation. Additional requirements can be found on the web at

Iowa’s law is similar to Nebraska. There is a 5% credit for rental income received with a cash rental agreement, and a 15% credit for the owner’s share under a share agreement. To qualify, Iowa beginners must have a net worth of not more than $300,000 ($600,000 for eligible partnerships); be legal residents; demonstrate adequate farming or livestock production experience or education; have access to adequate working capital, farm equipment, machinery or livestock; and "materially and substantially participate in farming the assets subject to the lease." Additional requirements and more information can be found at

Please contact your state Department of Agriculture to find out more about programs available in your area to assist beginning farmers and ranchers.