Three new tax hikes for farmers and ranchers, that’s how the American Farm Bureau’s tax adviser describes President Joe Biden’s tax plan to pay for his massive infrastructure and social spending package.
President Biden addressing a joint session of Congress Wednesday evening said, “We’re going to get rid of the loopholes that allow Americans to make more than a million dollars a year, and pay a lower tax rate on their capital gains, than Americans who receive a paycheck.”
But Biden’s plan could still mean higher tax bills for some producers, according to American Farm Bureau’s Pat Wolff.
“The capital gains tax rate is nearly doubled, from 20 to 39.6 percent. But that higher rate will only apply to households making over $1 million. The second change is that capital gains will be imposed at death. This is a new tax at death. However, there’s an exemption for this tax, this new tax, too, of $1 million, or $2 million of gain per couple.”
Stepped-up basis would still apply under those limits, and there’d be no tax if a farm remains in a family, while estate tax exemptions would not change. But Wolff says gains on like-kind real estate swaps will lose their exclusion.
“That will be repealed, where there will be a new tax on those kind of transfers, when the gain is more than $500,000.”
USDA meantime claims that based on estimates, more than 98% of farm estates will not owe any tax at transfer, provided the farm stays in the family.
Farm Bureau’s position is that “current law” allowing capital assets to transfer tax-free at death is the best way to help farms and ranches. Biden’s plan may still allow that, but Wolff says it comes with “a lot of strings and conditions” that are still unknown.