Clarification for calculation of estimated tax payments when making an election under section 1062(a)

If you downloaded or printed the 2026 Publication 505, the current revision of Publication 505 does not provide an opportunity to account for a properly made election under section 1062(a) for the sale of qualified farmland property to a qualified farmer when calculating estimated tax payments.

If you properly made an election under section 1062(a) applicable to a portion of your tax liability for 2026, the 2026 Estimated Tax Worksheet (Worksheet 2-1) and the Annualized Estimated Tax Worksheet (Worksheet 2-9), need to account for the reduction in applicable net tax liability (with respect to the qualified sale or exchange as to which you have properly made the section 1062(a) election).

On Worksheet 2-1, line 11b – if you properly made an election under section 1062(a) applicable to a portion of your tax liability for 2026, include on line 11b 75% of the applicable net tax liability with respect to that qualified sale or exchange of farmland property. Don’t include amounts relating to an election under section 1062(a) made with respect to a different taxable year.

On Worksheet 2-9, line 20 – if you properly made an election under section 1062(a) applicable to a portion of your tax liability for 2026, and the income from the qualified sale or exchange is included in your income for the period of the particular column of Worksheet 2-9, Annualized Estimated Tax Worksheet, reduce the tax for that period by an amount equal to 75% of the applicable net tax liability with respect to that qualified sale or exchange of farmland property. The applicable net tax liability should be calculated by reference to the entire taxable year, and therefore the amount of this reduction should be the same for all periods for which the reduction is applicable. Don’t make this reduction for periods in which the income from the qualified sale or exchange is not included. Also, don’t include amounts relating to an election under section 1062(a) made with respect to a different taxable year.

The 2026 Publication 505 will not be revised. See Notice 2026-3, 2026-02 I.R.B. 307.