NASHVILLE, Tenn. (RFD-TV) — A new tax exemption for farmland real estate loans is beginning to reduce borrowing costs for farmers, even as lenders await formal guidance on how to apply the law. The Access to Credit for our Rural Economy Act (PDF Version) — also known as ACRE, which is included in the One Big Beautiful Bill Act (OBBBA) — took effect immediately on July 4 and gives banks a 25 percent tax exemption on interest earned from newly originated farmland loans.
While far smaller than the 100-percent exemption proposed initially, it still helps producers facing squeezed margins from high input costs and softer grain markets.
The law is expected to be especially helpful for farmers seeking to purchase land they currently rent or expand existing acreage. Bankers say even a quarter-point rate reduction can meaningfully improve cash flow for beginning farmers. But most institutions are moving cautiously while waiting for Treasury and IRS guidance clarifying technical gray areas, including how to handle the partial exemption, whether certain refinancings qualify, and how chattel or equipment loans might be treated when bundled into real estate deals.
Despite its limitations, the ACRE Act improves commercial banks’ competitiveness against the Farm Credit System, which receives a full interest-income exemption.
ABA estimates the law could save producers roughly $100 per acre annually over the next 30 years — far more than recent one-time emergency payments. Bankers also view the legislation as a significant policy foothold that builds momentum for future expansions, especially if Congress revisits broader tax legislation in the coming years.
Farm-Level Takeaway: The ACRE Act modestly reduces farmland borrowing costs now, with more savings possible once federal guidance clarifies which loans qualify.
Tony St. James, RFD-TV Markets Specialist
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