Agricultural Investment Act of 1985

Agricultural Investment Act of 1985 - Amends the Internal Revenue Code to allow an income tax exclusion for up to $1,000 ($2,000 for a joint return) of interest earned each year on an agricultural savings certificate. Defines an agricultural savings certificate as a certificate issued by a qualified savings institution in a specified denomination ranging from $10 to $1,000 which matures in 10, 15, or 20 years.

Requires institutions to: (1) use the proceeds of such certificates to purchase U.S. agricultural savings bonds; or (2) pay a penalty.

Revokes the tax exclusion of interest on any certificate redeemed or used as loan security before its maturity date.

Authorizes the Secretary of the Treasury to issue agricultural savings bonds. Requires the proceeds from the sale of such bonds to be credited to the Farm Trust Fund established by this Act. Authorizes the Secretary to prescribe how such a bond may be issued to a taxpayer in lieu of a refund check for overpayment of taxes.

Directs the Secretary of Agriculture to make loans from such Fund to certain lending institutions, with priority given to those institutions with the higher percentages of loans outstanding to bona fide farmers. Requires such institutions to loan the amount received to bona fide farmers meeting specified financial criteria and to return the portion not loaned within 60 days or incur a penalty. Limits the annual interest rate on such loans to farmers to nine percent. Defines a bona fide farmer as any individual 50 percent of whose annual gross income is directly attributable to the raising or cultivating of livestock or agricultural commodities.