New FSA Rules Expand Eligibility for Farm Program Payments

Farmers may see larger government payments under new Farm Service Agency (FSA) rules, and some who were previously ineligible may now qualify. The USDA recently issued new rules for certain FSA payment programs, following agriculture provisions in the One Big Beautiful Bill Act (OBBBA) signed last year. The changes affect payment limits, entity treatment, eligibility requirements, and reporting deadlines beginning with the 2026 program year. Key deadlines for capturing full benefits are approaching, so producers will want to review the changes soon. To help clients, prospects, and others, Dermody, Burke & Brown, CPAs, has provided a summary of the key details below.

Key Changes to FSA Payment Rules

Higher Payment Limits — FSA administers a number of agricultural programs, including Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC). These programs make payments to producers when crop prices or farm revenue fall below certain thresholds. Prior to OBBBA, the ceiling on payments was at $125,000. It’s now $155,000 beginning with the 2025 crop year, indexed for inflation going forward. The higher limit reflects what producers may receive in the coming months, pending that all eligibility and reporting requirements are met.

Payment Eligibility — To implement provisions under OBBBA, the USDA recently created a new category called a Qualified Pass-Through Entity (QPTE). The category includes many LLCs, S corporations, partnerships, and other joint ventures. Under the previous rules, these entities were generally limited to a single payment cap regardless of how many owners were involved. Under the new rules, each qualifying owner of a QPTE may be entitled to a separate payment limit.

For example, a qualifying operation with two active owners could potentially access up to two payment limitations rather than one. Using the current ARC and PLC payment ceiling, that could mean up to $310,000 rather than $155,000, assuming all eligibility requirements are met. Some producers may want to revisit whether the current entity structure is still the best fit.

Qualifying as Actively Engaged — Qualifying for a separate payment limit under the QPTE rules requires each owner to meet the active engagement standard. This means making a meaningful contribution to the operation through labor, management, capital, land, equipment, or some combination of those factors.

Under the new rules, salaried members of pass-through entities may count toward that eligibility standard. For example, a family member who is paid a salary to manage day-to-day operations may now be able to establish active engagement through that role, where the same arrangement might not have qualified under prior rules.

AGI and Farming Income Test — The $900,000 average adjusted gross income (AGI) limit remains in place. Producers whose three-year average AGI exceeds that amount are generally not eligible for many FSA programs. An exception applies if at least 75% of the producer’s average gross income comes from farming, ranching, or silviculture activities.

USDA confirmed that revenue from agritourism, direct-to-consumer sales, and certain other farm-related activities may now count toward that 75% test. Producers who operate farm stands, host on-farm events, or sell products directly to consumers may be able to meet the threshold under the new rules.

New Reporting Requirements — The new rules introduce additional reporting obligations for some producers. Certain entities will need to update farm operating plans and ownership information on file with FSA in order to take advantage of the revised provisions. The USDA has set a September 15, 2026, deadline for these updates. Going forward, FSA will generally use ownership and entity information that was on file as of June 1 when applying payment limitation and eligibility rules. Producers who have not updated their records may not receive the full benefit of the new provisions.

Next Steps

Producers participating in FSA programs should review entity structure, ownership arrangements, income sources, and FSA records to determine how the new rules apply to the existing operation. Farms operating as pass-through entities may be particularly affected. Operations with multiple owners or diversified revenue streams should also revisit eligibility assumptions based on prior rules.

Contact Us

These changes create new opportunities and planning considerations for many in the agricultural community. Consulting with advisors is recommended to capture the highest potential benefit. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Dermody, Burke & Brown, CPAs can help. For additional information call 315-471-9171 or click here to contact us. We look forward to speaking with you soon.