Young farmer tax credit gets boost from state lawmakers
In January, money for a tax credit aimed at helping newer farmers ran out in one day. Around 300 farmers were turned away.
However, lawmakers decided to remove the cap on funds for the remainder of 2026, so those farmers and more will be eligible for thousands of dollars in tax credits.
Minnesota’s farmers are aging, and in order for the industry to stay healthy, the next generation of farmers needs to get in the game.
But farming is an expensive, capital-heavy business to get into, even for those who grew up on farms themselves. Land, in particular, is difficult for new farmers to access. Farming families hold on to tillable acres for generations and when land does go on the market, it’s expensive.
In 2017, the Minnesota Legislature created the Beginning Farmer Tax Credit to incentivize established farmers to rent or sell equipment, livestock and land to beginning farmers. Beginning farmers are defined as the roughly 25 percent of Minnesota farmers who have been farming for 10 years or fewer.
“I have always tried to pitch it to landlords and people I’m buying land from,” said Zach VonRuden. He grows corn and soybeans and raises steers in southeastern Minnesota.
A younger farmer like VonRuden and an established farmer negotiate a deal, then they apply for the credit together. Then, the established farmer collects the tax credit: up to $7,000 for cash rentals, $10,000 for share rentals and $50,000 for sales.
The program also requires beginning farmers to work with a farm business management instructor and provides an educational tax credit of up to $1,500 for three years to help pay for that.
“I think it gives younger operators a little more opportunity to be a little more competitive in a very competitive land market,” VonRuden said.
His father raised dairy cows for years, but VonRuden and his wife, April, got their own start in farming in 2016. Then they teamed up with VonRuden’s father to raise steers a few years later.
In 2024 and 2025, about 450 asset owners claimed the credit, according to the Minnesota Department of Agriculture. Most applicants apply for the credit for leasing land.
“I love the program,” VonRuden said.
VonRuden used the tax credit twice to rent land in 2021 and 2022, and once to buy land in 2023. In negotiations with landowners, the tax credit was incentive enough for them to agree to multi-year rental agreements, VonRuden said.
“It’s touching hundreds of folks throughout the state,” said Jenny Heck, who coordinates the program through the MDA. Heck said Minnesota is one of seven states with a similar program and was the first state to have a credit that incentivizes sales in addition to leases.
Fostering ‘farmer-to-farmer connections’
Heck said the program’s mission is to “get farmland into the hands of the next generation” and “foster farmer-to-farmer connections.” Heck said about half of the rentals and sales are between people who haven’t had a business relationship before, according to her department’s surveys.
The surveys also found about half of the asset owners will pass on their tax credit as a discount to the beginning farmer.
Alex Formo, a row crop farmer from Maynard in western Minnesota, has experienced that firsthand.
“It was definitely a good way to get my foot in the door with the landowners,” Formo said.
About five years ago, Formo reached out to two landowners to negotiate lease agreements. Formo said the tax credit was an “added bonus” for those landowners that has strengthened his relationships with them. Together, they’ve applied for and received the credit for several years.
“When you’re helping the landowner, chances are they’re going to probably help you also,” Formo said.
One of the landlords decided to share some of the credit money with Formo. The other did not, but Formo is still happy with the arrangement. “I get the opportunity to farm their land. That’s what I’m in it for,” Formo said.
In 2023, the Legislature voted to expand eligibility for the program and lower the total amount of available funds from $6.5 to $4 million, though the tuition reimbursement wasn’t capped.
Those changes resulted in farmers being turned away from the program due to lack of funding for the first time. In 2024, about 40 percent of farmers who applied for the credit were turned away, and in 2025, it was more than 50 percent, according to the MDA.
Formo has been lucky; some farmers like him have continued to secure funding because repeat applicants and multi-year leases have been prioritized in the program.
But Megan Horsager, a crop farmer from Montevideo, has been turned away two years in a row.
“Every time, the funding has run out before we’ve got our application in,” Horsager said.
Horsager said she’s worried that next time her lease agreement is up for renewal, one of her neighbors could approach her landlord with a better offer. The credit could give her a leg up on the competition.
“With any landlord, there’s always a chance of them renting it to someone else and not to you,” Horsager said.
What happens when funds run out
After clearing the program’s hurdles three times, VonRuden had also been striking out as of late.
“With funds running out, I’ve tried to apply earlier and earlier every single year,” VonRuden said.
This year, he applied Jan. 7. Even then, he was a week too late. The application opened Jan. 1 and funds ran out by the next day.
The land owners he worked with were ultimately understanding when the funds ran out, but VonRuden said they “weren’t happy.”
VonRuden isn’t the only young farmer to experience unintended negative consequences of the credit funding cap.
Mark Wehe is a farm business management instructor who works with many farmers who have utilized the Beginning Farmer Tax Credit and tuition reimbursement, including VonRuden.
Wehe said the credit can be a win-win for younger and older farmers. However, if the program isn’t fully funded, something meant to build a bridge between newer and established farmers can do the opposite.
When landlords hear they won’t be getting the credit after all, he said, “then all of sudden they try to charge the young farmer more. It just creates a contentious situation.”
Wehe said some of his colleagues have even been wary of promoting the credit to beginning farmers because of “negative ramifications to young farmers when the credit doesn’t happen.”
“That tax credit can be the difference between being able to purchase a piece of land and not,” Horsager said. “It’s really frustrating when a program that’s out there (is) advertised as, ‘Look, we support young farmers,’ but it isn’t really working for most of the young and beginning farmers in the state.”
Farmer advocacy
Farmers have been at the state Capitol asking for the credit to be fully funded. Twenty organizations representing Minnesota farmers signed on to a letter to lawmakers that read, in part: “we write to express strong support for lifting the cap on total state funding available to the Beginning Farmer Tax Credit so that no new farmer is turned away from this nation-leading program.”
Ultimately, a bipartisan group of lawmakers led by Sen. Aric Putnam, DFL-St. Cloud, successfully lifted the cap as part of a bipartisan tax deal that was signed into law May 27. But the law only lifts the cap for 2026, meaning advocates will likely be back at the Capitol again next year pushing to lift the cap permanently.
Still, the new law is a big deal for the hundreds of farmers who applied for the credit and were denied this year, including Zach VonRuden and Megan Horsager.
Horsager said she spoke with lawmakers about her experience being repeatedly denied for the credit.
“I think what I said actually sunk in and made a difference,” Horsager said. “This is one small step that I am certainly thankful for.”
This is the last year VonRuden and his wife count as beginning farmers, but he said he hopes the cap on funding gets removed permanently and more farmers can benefit from the credit.
“Look into the program, talk to your landlords, try and use it. It can be an advantage for someone that’s looking at trying to get into a very competitive field.”
