What are this year's tax changes and how will they impact New Hampshire farm families?

In July of 2025, Congress passed legislation called the One Big Beautiful Bill Act (OBBB) that extends previous tax provisions and makes some additional changes. Some of these changes took effect in tax year 2025 and will be used this tax season when filing your return. Several other provisions will not take effect until the 2026 tax year. 

When meeting with your financial or tax advisor, be sure to note when OBBB provisions will be taking effect. Below is a brief summary of key OBBB tax provisions that will likely have an impact on the returns of many farm families in New Hampshire.

Impact on Taxes for the Individual

In tax year 2025, the standard deduction increases to $15,750 for single individuals and $31,500 for those married filing jointly. 

Starting in 2025, there is an additional tax deduction of $6,000 for taxpayers 65 and older. This is a temporary deduction that is in effect only for tax years 2025 to 2028. This $6,000 increase in the standard deduction starts to phase-out (or be reduced) for single, filing taxpayers who have reached a taxable income of $75,000 and for married, filing jointly taxpayers with a taxable income of $150,000.

Also new for tax years 2025 to 2028 is a deduction for interest paid on a personal vehicle purchase. The vehicle purchased must be a new vehicle with final assembly in the United States, used for personal purposes and secured with a loan. The maximum deduction is $10,000 per year and only can be used for a new vehicle purchase, not for a vehicle lease.

The state and local tax deduction is used to reduce federal income tax owed by the amount a taxpayer pays state and local taxes, including property taxes on a personal residence. This deduction is only available for qualified taxpayers who itemize their deductions. Starting with the 2025 tax year, eligible married taxpayers filing jointly can deduct up to $40,000 in state and local taxes paid, this is an increase from $10,000. While most taxpayers do not have enough deductions to itemize, this temporary increase combined with other deductions may make it worthwhile for some taxpayers to itemize deductions.

For taxpayers who make charitable contributions and do not itemize their deductions, a permanent deduction is available starting in 2026. Single taxpayers can deduct up to $1,000 in qualifying donations. Individuals who are married filing jointly can deduct up to $2,000 in qualifying donations.

The donations must be a cash donation made to a public charity. See https://www.irs.gov/charities-non-profits/charitable-organizations/public-charities for more information on what qualifies as a public charity. You will need documentation to substantiate your contribution, which depends on the amount donated. See https://www.irs.gov/pub/irs-pdf/p526.pdf for details on substantiation requirements. 

For farm families with college-bound children who plan to apply for federal student aid (FAFSA), farm and small business net worth will no longer be required as part of the application starting with the 2026-2027 school year. To qualify, the farm must be an income-producing farm, and the farm family must live on the farm property. This provision also applies to family-owned businesses with 100 or fewer full-time employees, and commercial fishing businesses owned or controlled by a family. This change makes more families eligible for federal financial aid.

Impacts on Agriculture Businesses

There are several significant business provisions, some will impact farms only in certain circumstances.

The deduction for qualified overtime, which is in effect for tax years 2025 to 2028, benefits the individual worker and must be reported on the W-2. Agriculture workers are generally exempt from overtime. However, there are many instances where workers on the farm are doing non-agricultural work, such as working in a farm store, cleaning and packing produce, or coordinating on-farm events. These are non-agriculture jobs in which employers must comply with the Fair Labor Standards Act (FLSA), resulting in overtime pay for any hours worked beyond 40 hours worked in a week.  

If you have an employee that is generally an agricultural employee and they work as little as one hour a week on a non-agricultural activity, all hours beyond 40 are considered qualifying for overtime pay even if the remaining hours were agricultural work. Employees who are eligible for overtime are paid one-and-a-half times their hourly rate. 

The elimination of tax on tips is another significant tax provision included in this legislation. Many of our agricultural business employees do not receive tips, but some do, particularly if you have a food serving establishment. Note that qualifying tips include those received for providing, delivering, or serving of food or beverages for consumption. It is important to report tips on the W-2 Wage Statement so that employees who are eligible can properly take this deduction.

If you sell farmland to a qualified farmer, and you have either farmed the property yourself or leased the property to a qualified farmer over the previous ten years, you may elect to spread out the tax payment on the gain of the sale of the property over four years. The property must be under a covenant or other legally enforceable instrument that restricts the use of the property to farming. A copy of the covenant must be included with the tax return and must be kept on file for ten years. This election is available to qualifying farmland sales occurring on or after July 4, 2025.

Direct payments for services that are subject to 1099 reporting have increased to a minimum threshold of $2,000 beginning in 2026. Keep this in mind when it is time to send 1099’s by the January 31 deadline in 2027 for the 2026 tax year. (For 2025 the minimum threshold remained at $600 for direct payments.)

The qualified business income deduction, which provides a 20% deduction on business income, has been made permanent. This deduction was set to expire on December 31, 2025. This is a commonly used deduction for pass-through entities which includes sole proprietorships, partnerships, and S Corporations. As you work with your tax preparer, be sure to consider this deduction. 

As you prepare for filing your taxes, it is worth reviewing the provisions which changed and those which were extended in 2025.  New and extended tax provisions may affect your original tax plans. Working with a qualified tax preparer will likely help you better manage tax liabilities and prove beneficial to your bottom line.