Many farmers and ranchers that are nurturing hundreds of acres of property were relieved when lawmakers announced the 2013 estate and gift tax legislation
Many farmers and ranchers that are nurturing hundreds of acres of property were relieved when lawmakers announced the 2013 estate and gift tax legislation, which made it significantly less costly to pass down land and assets to successors and new generations. However, given that today’s farming producers own significant swathes of land – most of which has been in their families for generations – some are lobbying for more flexible rules that will make wealth transfers easier.
Under the existing estate and gift tax laws, farmers can pass $5 million – $5.25 million, once indexed for inflation – in farmland, equipment, and other assets to successors without triggering estate taxes. This is a significant allowance, as the allowances were initially set to revert back to the 2001 rate of $1 million. The current exemption doubles to $10.5 million for joint filers. In addition, lawmakers also raised the gift tax threshold to $14,000 – or $28,000 for married joint filers – up from $13,000 in 2012.
Duane Hund, an extension farm management specialist with Kansas State University, notes that the changes are uniquely positive for farmers, as potential taxes on property over that amount are capped at 40 percent, or 10 percentage points lower than if Congress hadn’t acted, according to the Kansas City Star. Further, Hund noted that the portability of the exemption is a new feature that will greatly facilitate wealth transfers for farmers. The new portability rule means that should a husband or wife pass away and leave an estate that is smaller than the $5.25 million exemption, the surviving spouse can add the unused amount to her or his own $5.25 million exemption at the second death.
Although farmers and ranchers are in a much better position, the American Farm Bureau is lobbying lawmakers to repeal the federal estate tax altogether.
“Individuals, family partnerships and family corporations own 98 percent of our nation’s 2 million farms and ranches,” said AFBF president Bob Stallman. “When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners may be forced to sell land, buildings, or equipment needed to keep their businesses running.”
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