The Department of the Treasury and the Internal Revenue Service issued guidance on a new tax benefit for agricultural lenders in November 2025. The new tax provision (Section 139L of the Internal Revenue Code), enacted as part of the OBBBA, allows qualified lenders to exclude 25% of the interest income from eligible rural and agricultural real estate loans from their gross income. The partial exclusion is intended to reduce borrowing costs for rural communities, encourage private investment in agricultural development and expand access to affordable credit in underserved markets. The guidance is in effect now and will apply until the IRS finalizes more detailed regulations. This direct financial benefit to lenders is expected to indirectly help borrowers: 

• Lower Borrowing Costs: Because lenders can make more profit on these loans due to their lower tax burden, competitive market forces are expected to result in them offering more attractive, lower interest rates to qualifying borrowers.
• Expanded Credit Access: The incentive encourages more financial institutions to participate in the agricultural lending market, increasing the overall availability of funds for agricultural purposes and supporting lending in underserved rural areas.
• Enhanced Loan Terms: The increased profitability may allow lenders to offer better overall loan terms, such as higher loan-to-value ratios or more flexible repayment schedules, for qualifying loans.
• Support for Investment and Growth: Easier and more affordable access to credit for purchasing equipment, land acquisition, and infrastructure improvements helps farmers and agricultural businesses invest in their operations and support food security. 

Borrower Requirements

To access these potential benefits, borrowers must secure a loan that meets specific criteria: 

• New Loans: The loan must be originated after July 4, 2025. Refinancing an existing loan does not qualify for the interest exclusion, though new funds (an increase in principal) beyond the original balance in a partial refinancing may be eligible.
• Qualified Property: The loan must be substantially secured by rural or agricultural real estate in the United States that is used for:
  • The production of one or more agricultural products.
  • The trade or business of fishing or seafood processing.
  • An aquaculture facility.
• U.S. Based: The borrower must be a U.S.-based entity or individual.