A dynamic model of capital structure for the noncorporate farm is developed and analyzed. The model examines the effect on optimal capital structure of (1) bankruptcy risk, (2) the difference between the riskless rate and the expected return in agriculture, and (3) the difference between the off-farm wage and the implicit on-farm wage. If the difference between the wages is O, a constant leverage is optimal under reasonable circumstances. The model predicts that older farmers require more leverage to induce them to remain in farming and that they tend to reduce their leverage as retirement approaches. The model is tested with cross sectional data.