Wednesday, September 15, 2021

Farm Estate Taxes

There's been maneuvering in the House over how to handle the estate tax, particularly with regard to farms.  The argument is that increasing the estate tax (has the term "death tax" been obsoleted?) means that heirs of farmers will be forced to sell out to pay the tax, rather than continue to farm the family's heritage. This is regarded as obviously wrong and evil, especially by farmers. 

Saw that recently about 75 acres of Iowa farmland were sold for $22K an acre, which is incredibly high. I suspect economists might say there are benefits to forcing land onto the market, rather than passing it on from parents to children.  The alternative to selling would be to take a loan backed by the acreage to pay the taxes, which seems to be the strategy the billionaires use to get spending money from their stockholdings in their IRAs. Presumably an increased estate tax would cut the market value of the land. 

At any rate, it seems the farmers' political power remains high, and there won't be big changes in the estate tax for farms.  Here are some facts:

Under current estate tax law, $11.7 million in assets are exempt from taxes for heirs. In 2019 -- the last available year from the IRS -- the exemption was $11.18 million. That year. there were 2,570 estates that paid taxes on $77.2 billion in assets (on average about $30 million per estate). There were 269 taxable estates that reported farm assets worth $1.3 billion (on average $4.9 million per estate). With the exemption, that means those farm estates averaged about $16.1 million in value. The average overall tax rate paid that year was 17%, according to IRS statistics.





https://www.dtnpf.com/agriculture/web/ag/blogs/ag-policy-blog/blog-post/2021/09/10/know-debate-stepped-basis-capital-2?referrer=twitter#.YTuhj6GcPjc.twitter

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