Special-Use Valuation (Section 2032A)

Updated August 3, 2026. Quick answer: section 2032A lets an executor value qualified farmland by its farm use instead of its market value, and for a decedent dying in 2026 that election can reduce the estate’s valuation by up to $1,460,000. The reduction is capped; the obligation is not. For ten years after the death the heirs have to keep farming the ground, and if they stop, part of the tax comes back.

The cap is on the discount, not on the farm

This is the detail most often stated backwards. The figure is not a size limit on farms that qualify, and it is not an exemption. It is a ceiling on how far the election may push the value down.

For an estate of a decedent dying in calendar year 2026, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes of the estate tax cannot exceed $1,460,000.

— Rev. Proc. 2025-32, section 3.41

So a farm appraised at $4,000,000 (2026) that would be worth $2,000,000 as farmland does not get valued at $2,000,000. It gets valued at $2,540,000 — the market figure less the maximum decrease. Above that gap the election simply runs out of room.

Two percentage tests, and they measure the estate

Both tests compare the farm to the whole adjusted gross estate, which means a family can fail them by being too diversified. A large brokerage account can push the farm below the thresholds and cost the election.

50 percent or more of the adjusted value of the gross estate consists of the adjusted value of real or personal property which— (i) on the date of the decedent’s death, was being used for a qualified use by the decedent or a member of the decedent’s family, and (ii) was acquired from or passed from the decedent to a qualified heir of the decedent. (B) 25 percent or more of the adjusted value of the gross estate consists of the adjusted value of real property which meets the requirements of subparagraphs (A)(ii) and (C), (C) during the 8-year period ending on the date of the decedent’s death there have been periods aggregating 5 years or more during which— (i) such real property was owned by the…

— 26 U.S.C. §2032A(b)(1)

In plain terms: farm assets have to be at least half the adjusted estate, the real property alone at least a quarter, and for five of the eight years before death the ground had to be owned by the family, used as a farm, and materially participated in by the family. Retiring and stepping back too early can break the last one.

The surviving spouse gets an easier standard

Material participation normally means real involvement in the operation. For a surviving spouse the statute substitutes a lower bar, which matters because the widow of a farmer is frequently the person the requirement would otherwise defeat.

If property is qualified real property with respect to a decedent… and such property was acquired from or passed from the first decedent to the surviving spouse of the first decedent, for purposes of applying this subsection and subsection (c) in the case of the estate of such surviving spouse, active management of the farm or other business by the surviving spouse shall be treated as material participation by such surviving spouse in the operation of such farm or business.

— 26 U.S.C. §2032A(b)(5)(A)

Ten years of strings

If, within 10 years after the decedent’s death and before the death of the qualified heir— (A) the qualified heir disposes of any interest in qualified real property (other than by a disposition to a member of his family), or (B) the qualified heir ceases to use for the qualified use the qualified real property which was acquired (or passed) from the decedent, then, there is hereby imposed an additional estate tax.

— 26 U.S.C. §2032A(c)(1)

Two things trigger the additional tax: selling to someone outside the family, or ceasing the qualified use. The second one is the trap, because it can happen without anyone deciding anything — it is measured by a clock.

(B) during any period of 8 years ending after the date of the decedent’s death and before the date of the death of the qualified heir, there had been periods aggregating more than 3 years during which- (i) in the case of periods during which the property was held by the decedent, there was no material participation by the decedent or any member of his family in the operation of the farm or other business, and (ii) in the case of periods during which the property was held by any qualified heir, there was no material participation by such qualified heir or any member of his family in the operation of the farm or other business.

— 26 U.S.C. §2032A(c)(6)(B)

More than three years, added together, inside any eight-year window with no material participation by the heir or the heir’s family. An heir who moves away and lets the ground sit under a farm lease to a neighbour can drift across that line without ever making a decision.

How that clock interacts with the way the ground is farmed is the subject of cash rent versus crop share.

Honest gaps

The election requires a written agreement signed by everyone with an interest in the property, and the recapture rules have edge cases — involuntary conversions, timber, woodland elections — that this page does not cover. We have stated the statute; the Treasury regulations under 2032A carry the operational detail.

General information drawn from the Internal Revenue Code, Treasury regulations, IRS publications and the relevant state statutes, not legal or tax advice. Dollar figures are adjusted regularly and the state-law half differs from state to state, so check the current year and your own state before you act on a number.