As Arizona farmers and ranchers navigate the challenges of rising costs and tight margins, a significant policy shift looms on the horizon. The 2017 Tax Cuts and Jobs Act (TCJA) includes provisions critical to farm families, many of which are set to expire on December 31, 2025. These expirations could increase tax burdens and affect your ability to invest in your operation.

Understanding the TCJA Expirations

The TCJA brought substantial tax relief for farmers and ranchers, but several provisions are temporary and will phase out by the end of 2025 unless Congress acts. Here’s what’s at stake:

  • Individual Income Tax Cuts
     The TCJA lowered income tax rates for individuals, providing relief for farm families who often report farm income on personal tax returns. These cuts began phasing out in 2022, and the most significant tax increases will hit in 2026 if the provisions expire. For Arizona farmers, this could mean higher taxes on income from crops, livestock, or off-farm work, reducing cash flow for operational expenses like seed, feed, or labor.
  • Qualified Business Income Deduction (QBID)
     The QBID, or Section 199A, allows pass-through businesses like sole proprietorships, partnerships, and S corporations—common structures for Arizona farms and ranches—to deduct up to 20% of qualified business income. This deduction has been a lifeline for reducing taxable income. If it expires, your tax bill could rise significantly, especially in years with strong revenue.
  • Capital Expensing Provisions (Section 179 and Bonus Depreciation)
    Farming and ranching are capital-intensive, requiring constant investment in equipment, irrigation systems, and infrastructure. The TCJA expanded two key deductions to help offset these costs:
    • Section 179 allows farmers to deduct the full cost of qualifying equipment (e.g., tractors, pivots, or livestock trailers) up to a limit ($1.16 million in 2025, adjusted for inflation) in the year of purchase.
    • Bonus Depreciation permits an additional deduction (currently 60% in 2025, down from 100% in prior years) for new and used property, including larger assets like barns or heavy machinery. These provisions reduce taxable income, freeing up cash for reinvestment. If they expire or are scaled back, you’ll face higher taxes on funds used for capital purchases, effectively increasing the cost of upgrading your operation.
  • Estate Tax Relief
     The TCJA doubled the estate tax exemption (to $12.92 million per individual in 2025, adjusted for inflation), shielding more farm estates from federal taxes. Arizona’s lack of a state estate tax already helps, but the federal exemption is set to revert to roughly half its current level in 2026. For family farms with significant land and equipment value, this could complicate succession planning, forcing heirs to sell assets to cover tax bills.

The Rising Cost of Capital Investments

Arizona’s farmers and ranchers face escalating costs for land, equipment, and technology, even as commodity prices remain volatile. In Arizona, a new center-pivot irrigation system or a high-capacity tractor can easily exceed $500,000, while land prices in areas like Pinal County continue to climb.

Capital investments aren’t treated as operating expenses (like fuel or labor) for tax purposes because they add long-term value to your operation. Without deductions like Section 179 or bonus depreciation, you’d pay taxes on the income used to buy these assets, effectively taxing your reinvestment in your business. These deductions allow you to recover some costs by lowering your taxable income, making it feasible to upgrade equipment or expand infrastructure.

What to Prepare for in 2025

The TCJA expirations could reshape your financial planning. Here’s how Arizona farmers and ranchers can prepare:

  • Monitor Tax Policy Developments
     Congress will likely debate tax code updates in 2025. Stay informed through organizations like the Arizona Farm Bureau or commodity groups, which track legislative changes. If the TCJA provisions are extended or modified, you’ll need to adjust your tax strategy accordingly.
  • Maximize Current Deductions
     While Section 179 and bonus depreciation are still available, consider accelerating equipment purchases before 2025. For example, buying a new tractor or upgrading irrigation systems in 2025 could maximize deductions under current rules. Consult your tax advisor to ensure purchases qualify and align with your cash flow.
  • Plan for Higher Taxes
     If individual tax rates rise or the QBID expires, your tax liability could increase. Work with an accountant to model scenarios for 2026 and beyond. Setting aside reserves now can help cushion the impact of higher taxes, especially in years with strong yields or livestock sales.
  • Revisit Estate Plans
     If the estate tax exemption drops in 2026, multi-generational farms could face significant tax burdens. Meet with an estate planner to explore strategies like gifting, trusts, or restructuring ownership to minimize taxes. Arizona’s favorable state tax environment gives you some flexibility, but federal changes require proactive planning.
  • Leverage Current Tax Benefits: With Section 179 and bonus depreciation (60% in 2025) still available, consider accelerating equipment purchases, such as tractors or irrigation systems, before potential changes. The USDA’s historical support for such deductions indicates that Secretary Rollins may advocate for their continuation.
  • Invest in Efficiency
     With capital costs rising and tax relief potentially shrinking, focus on investments that boost efficiency. For example, precision agriculture tools (e.g., GPS-guided planters or drones) can reduce input costs, while energy-efficient irrigation systems can lower water and power bills. These upgrades may qualify for deductions now and save money long-term.
  • Engage with Policymakers
     Share your concerns with Arizona’s congressional delegation. Lawmakers need to hear how TCJA expirations affect rural communities. Joining advocacy efforts through groups like the Farm Bureau can amplify your voice.

Looking Ahead

The TCJA expirations are a critical issue for American and Arizona’s farmers and ranchers, who already operate on thin margins in a high-cost environment and American Farm Bureau and the Arizona Farm Bureau are working to resolve the tax issues. By understanding the provisions at risk—individual tax cuts, the QBID, capital expensing, and estate tax relief—you can take steps to protect your operation. Stay proactive: consult with tax and estate professionals, leverage current deductions, and advocate for policies that support agriculture. With the right preparation, you can navigate these changes and keep your farm or ranch thriving in Arizona’s challenging landscape.

  • Engage with Advocacy Groups: The administration’s focus on farmers, as voiced by Secretary Rollins, suggests receptiveness to agricultural concerns. Join efforts through groups like the Farm Bureau to ensure your voice reaches Congress, emphasizing the importance of tax relief for Arizona’s capital-intensive operations.
  • Plan for Estate Tax Changes: The estate tax exemption, critical for family farms, may drop significantly in 2026. The USDA’s prior emphasis on estate tax relief suggests that Rollins may push for policies to protect farm succession. Consult an estate planner to prepare for potential tax increases.

Hopeful Outlook

The current administration appears to be working with Congress to get tax relief for American and Arizona farmers and ranchers. The administration’s commitment to farmers, as expressed by USDA Secretary Rollins’ focus on rectifying trade disadvantages, and the USDA’s historical advocacy for tax relief provide a foundation for optimism. Arizona farmers and ranchers can take heart that the administration appears attuned to their needs, with Congress likely to prioritize TCJA extensions, based on current comments from congressional representatives. This has also been fostered by several meetings with American Farm Bureau Federation. And certain members of Congress have been vocal about the importance of the TCJA.

Representative Randy Feenstra’s (R-IA) in his weekly column, published January 9, 2025, said, “At the end of this year, significant portions of the Tax Cuts and Jobs Act (TCJA), which was signed into law in December of 2017, officially expires. That means that – absent congressional action – taxes for Iowa families, farmers, and businesses will increase. As a member of the House Ways and Means Committee, I will be working closely with President Trump, Chairman Jason Smith, and my colleagues to reauthorize the Tax Cuts and Jobs Act, build upon the major successes of this law, and prevent massive tax hikes on Iowans and Americans everywhere.”

Additionally, in a Bloomberg report, Representative Jason Smith (R-MO), Chairman of the House Ways and Means Committee, was quoted saying, “The momentum driving our shared priorities of job growth, economic competitiveness, and fiscal responsibility through tax reform is undeniable. The Tax Cuts and Jobs Act delivered historic tax relief for hardworking Americans and unleashed unprecedented economic growth. Our committee is working tirelessly to ensure these gains are not lost.”

In a post on X, Representative Young Kim (R-CA) said, “Extending the TCJA is crucial—it slashed taxes for millions of families and businesses, fueling record job growth and wage increases under the previous administration.”

Last year in a CSIS article on “Revenue Implications of Tax Cut and Jobs Act Provisions in 2025,” Representative Kevin Brady (R-TX, retired), said, “The Tax Cuts and Jobs Act was a game-changer for American families and businesses, putting more money in the pockets of hardworking taxpayers and fueling economic prosperity. Allowing these provisions to expire would be a step backward for our economy.”

And on the administration side, Rollins stated in a recent X post, “For decades, the way we have been treated in this country and especially our farmers and ranchers is absolutely stunning. We have been living under a tariff regime, but it has been the regime of other countries. The President is working to [address this].” For American farmers, this signals potential advocacy for tax provisions like Section 179 and bonus depreciation, which are vital for offsetting equipment costs.

The administration is actively engaging with a Republican-led Congress, which is poised to prioritize extending TCJA provisions. According to Bloomberg Government, “With a Republican-led White House and Congress, policymakers are projected to preserve a majority of the TCJA provisions,” though funding challenges remain. This alignment suggests that the administration, including the Department of Agriculture, is likely working with Congress to ensure tax policies support agricultural businesses. For Arizona’s agricultural community, this could mean continued access to the Qualified Business Income Deduction (QBID) and capital expensing provisions, which are critical for managing taxable income and equipment investments.

The historical precedent of USDA on TCJA advocacy was evident in 2018 in a USDA report under then-Secretary Sonny Perdue highlighting TCJA’s benefits for farmers, noting that, “average tax rates are expected to decline across all farm sizes and commodity specializations and fewer farm estates will be subject to the Death Tax.” While this predates the current administration, it establishes a precedent for the USDA advocating for tax policies that support agriculture. Secretary Rollins, given her vocal support for farmers, is likely to continue this advocacy, working with Congress to address the 2025 expirations. Arizona farmers can take encouragement from this institutional focus on their economic needs.

For an additional deep dive on the TCJA expiration date and more, American Farm Bureau’s Economic team has written in-depth on this issue. American Farm Bureau Zippy Duvall continues to meet with this administration on the tax issue, in addition to labor issues.