A Summary of OBBB Tax Provisions Affecting Midwestern Farmers

By Andrew Keller

The One Big Beautiful Bill (OBBB) Act was signed into law in July 2025. Its primary tax impact is to prevent the 2026 sunset of major provisions of the 2017 Tax Cuts and Jobs Act (TCJA). The OBBB makes many tax cuts permanent and introduces new benefits that will help farm operations. The OBBB’s impact can be understood through three farm enterprise domains:

Individual & Family Tax Relief: The Act permanently lowers individual income tax rates and the higher standard deduction from the TCJA. This prevents a significant, automatic tax increase for nearly all farm families. Furthermore, the Child Tax Credit (CTC) is enhanced and made permanent at a higher level. Taxpayers 65 years and older also gain an extra $6,000 deduction per person ($12,000 for a married couple) for 2025–28.

Business Investment & Profitability: For the 98% of farms operating as pass-through businesses (sole proprietorships, partnerships, S-corps), the OBBB delivers two permanent provisions. First, it secures the 20% Qualified Business Income (QBI) deduction and prevents its expiration. Second, it restores 100% bonus depreciation, reversing its phase-out and again allowing farmers to immediately fully write off new and used equipment. This incentivizes capital investment and modernization. The §179 expensing limit for smaller operations is also greatly increased. The Act also temporarily raises the SALT (State And Local Tax) deduction cap to $40,000 and fixes the business interest limitation (§163(j)), ensuring depreciation does not penalize farms with significant debt. Finally, the bill extends the Clean Fuel Production Credit, bolstering the biofuel market for corn and soybeans.

Estate & Generational Succession: The Act permanently increases the federal estate and gift tax exemption to $15M per person ($30M per couple), indexed for inflation. This is a substantial increase over the ~$7M level it would have reverted to in 2026. This ensures that the vast majority of family farms can be passed to the next generation without incurring substantial federal estate taxes. The legislation also preserves the “stepped-up basis” rule for inherited assets.

Provision	2025 Law (TCJA)	2026 Law without OBBB (TCJA Sunset)	2026 Law with OBBB
Individual Tax Rates (Top Rate)	37%	39.6%	37% (Permanent)
Standard Deduction (MFJ)	~$31,500	~$16,700	~$31,500 (Permanent)
Child Tax Credit (per child)	$2,200	$1,000	$2,200 (Permanent & Indexed)
SALT Deduction Cap	$40,000	Unlimited	$40,000 (through 2029)
QBI Deduction (§199A)	20%	0% (Repealed)	20% (Permanent)
Bonus Depreciation*	100%	20%	100% (Permanent)
Section 179 Expensing Limit	~$1.25 Million	~$1.3 Million	~$2.5 Million
Estate & Gift Tax Exemption	~$13 Million	~$7 Million	~$15 Million (Permanent & Indexed)

*The OBBB Act retroactively restored 100% bonus depreciation for the full year, superseding the previously scheduled 40% rate.