This Guide focuses on potential changes in the tax treatment of IRA loan payments made to distressed FSA direct borrowers in 2022, which may ease the tax burden for such borrowers.
In 2022, the Inflation Reduction Act (IRA) became law. The IRA instructs the United States Department of Agriculture (USDA) to help current USDA Farm Service Agency (FSA) Farm Loan Program borrowers that are “distressed borrowers” and that have a farm operation that is “at financial risk.” Recent updates affecting the IRA have important ramifications for farmers.
On March 27, 2023, USDA announced it was working with the Department of Treasury and the Internal Revenue Service (IRS) to help borrowers understand the potential tax effect of an IRA payment. Then, on April 6, 2023, USDA began sending letters to some FSA direct loan borrowers notifying them of changes to the way IRA payments should be reported to the IRS.
These changes announced by USDA are important and are likely to help many farmers, but can also be confusing. This Guide is intended to give a brief summary of those changes and the effects those changes are likely to have on farmers.
Farmers’ Guide to Changes in Taxation of Inflation Reduction Act (IRA) Loan Payments – April 19, 2023