The Internal Revenue Service (IRS) provided details on tax relief available to farmers and ranchers in 49 states, including Kansas, who sold livestock because of drought conditions.

According to the Kansas Livestock Association, the list of qualified counties in each state includes those that reported exceptional, extreme or severe drought from September 1, 2024, to August 31, 2025. There are 86 Kansas counties on the list. Producers within these counties may be able to defer capital gains on livestock sold due to drought.

The tax relief applies to capital gains realized from the sale of livestock used for draft, dairy or breeding purposes. Sales of other livestock—such as those raised for processing or held for sporting purposes—do not qualify.

Eligible producers must show drought conditions were the reason for the sale of qualified livestock and their region was in a federal drought designation at the time of the transaction. According to the IRS guidance, livestock can be replaced within four years, instead of the usual two-year period. This gives producers until the end of the first tax year after the first drought-free year after the four-year period to replace the livestock they were forced to sell. As a result, eligible farmers and ranchers whose drought-sale replacement period was scheduled to expire at the end of 2025 will have until the end of their next tax year to replace the sold livestock.

For a list of qualified counties (Notice 2025-52) and an example of how this IRS provision works (Notice 2006-82), click here.