Kentucky Farmers Turned Down $26.5 Million for Their Land. At 63, a Similar Sale Won’t Count as Work to Social Security.

A Kentucky mother and daughter became symbols of the fight over AI data centers after refusing roughly $26.5 million to sell family farmland near Maysville. The offer was many times what agricultural land in the area would ordinarily command. They chose the farm. For another farmer nearing retirement, saying yes could raise a very different question.

Picture a 63-year-old who has already started Social Security when a developer offers enough money for the acreage to make retiring immediately possible. He has spent decades earning income from the land. If he sells the land itself, does Social Security treat the windfall as another year of work? Generally, no. The tax return may notice every dollar of gain. Social Security’s retirement earnings test looks at something narrower.

Selling the Farm Is Different From Farming It

Someone under full retirement age (FRA) all year can earn $24,480 in 2026 before Social Security begins withholding $1 in benefits for every $2 above the limit. The test applies to wages and net earnings from self-employment. A gain from selling farmland generally falls outside that calculation when the property is not inventory or land held primarily for sale to customers in the ordinary course of business. Social Security regulations specifically exclude gains from disposing of those kinds of business assets when figuring net self-employment earnings.

That creates a useful distinction for a retiring farmer. Sell the land, and the gain itself generally does not count toward the earnings test. Sell the final crop, cattle held for sale, or other farm inventory, and that income can still belong to the farming business and affect net self-employment earnings. The size of the land deal does not change that distinction. A seven-figure gain can be invisible to the earnings test while a much smaller amount of actual farm income can count.

The Tax Return Sees a Much Bigger Event

Avoiding the earnings test does not mean the sale escapes tax. IRS rules require a farm sale to be broken into its component assets. Land and other business real estate held for more than a year may receive Section 1231 treatment, while a residence, depreciable buildings, equipment, inventory and other property can follow different rules. Only the gain, not the entire sale price, is potentially taxable.

A large taxable gain can also make more of an already-claimed Social Security benefit taxable. For a single filer, combined income above $34,000 can make up to 85% of benefits taxable; for a married couple filing jointly, that upper threshold is $44,000. That means up to 85% is included in taxable income, not that Social Security is taxed at an 85% rate. For a multimillion-dollar land sale, that distinction between the earnings test and the income-tax return becomes the heart of the decision.

Medicare May See the Sale at 65

A 63-year-old also has another clock running. Medicare generally determines income-related Part B and Part D surcharges using tax-return information from two years earlier. A major gain recognized at 63 can therefore help determine Medicare premiums when the seller reaches 65.

That does not make the sale a bad retirement move. It means the closing year matters because one extraordinary income event can touch taxes and Medicare even while leaving the Social Security earnings test alone. For someone who is 63 in 2026, required minimum distributions generally do not begin until age 75, leaving additional years to decide when IRA income should enter the picture.

Know What Is Being Sold Before Signing

A developer’s offer can turn decades of farm equity into retirement money overnight, but the agreement needs to separate the land sale from everything else changing hands.

1. Identify each asset in the deal. Land, buildings, equipment, crops and payments for services do not automatically receive the same tax or Social Security treatment.
2. Model the year of sale before choosing a closing date or payment structure. A properly structured installment sale may spread eligible gain across multiple years when payments actually arrive over time, while an all-cash closing generally does not.
3. Keep the earnings test separate from the tax bill. The land gain itself can stay outside Social Security earnings even while creating a very large federal tax and future Medicare-premium consequence.

We mapped nine IRS rules that quietly drain retirement accounts, this one included, in a free retiree tax trap guide. The Kentucky family decided the farm was worth more than the offer. For a farmer who decides otherwise, selling the ground is not the same thing as working it.

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