Drought Impacted Livestock Sales Receive IRS Tax Relief

By Scout Nelson

The Internal Revenue Service (IRS) has announced special tax relief for livestock producers across 49 states, including Kansas, who were forced to sell animals because of prolonged drought conditions.

This relief applies to capital gains from the sale of livestock used for draft, dairy, or breeding purposes when sales occurred between September 1, 2024, and August 31, 2025.

Counties eligible for this program are those that reported exceptional, extreme, or severe drought during the designated period. In Kansas alone, 86 counties meet the criteria. Producers in these areas may defer capital gains on qualifying livestock sales if drought conditions were the direct cause of the sale. Animals raised for processing or held for sporting purposes do not qualify.

According to IRS guidance, producers can replace the livestock sold within four years, rather than the usual two-year timeframe. This extension provides additional flexibility for rebuilding herds after challenging weather conditions.

Moreover, if the region remains in drought, the replacement deadline can be extended further. Producers have until the end of the first tax year following the first drought-free year after the four-year period to complete the replacement.

This means those whose replacement period was originally set to expire at the end of 2025 now have until the end of their next tax year to bring in new animals. The extended timeline is intended to help producers recover economically while maintaining breeding stock and operational stability.

The IRS updates its list of eligible counties annually, ensuring that producers in affected areas are aware of the program and its benefits. By allowing capital gains deferral and providing extra time to replace livestock, the IRS aims to support agricultural operations that face financial strain due to severe weather.

This federal tax relief program offers critical assistance to livestock operations coping with drought, giving them more time and financial room to rebuild herds and continue contributing to the nation’s food supply.

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