Estate Tax Cliff Threatens Family Farms

The cost of inheriting the family farm will increase dramatically at the end of the year if Congress doesn’t take steps to extend the elevated estate tax exemption. American Farm Bureau economists analyzed the estate tax cliff in a Market Intel this week.

“Just last year, USDA estimated that if the estate tax exemption reverts to its pre-Tax Cuts and Jobs Act level, nearly twice as many farms in every sales class would have to pay estate taxes,” the Market Intel states. “The average net worth of farms subject to the estate tax would be lower under the permanent exemption level—falling from $32.5 million at the higher exemption to just under $20 million, meaning more smaller farms would be impacted. Low sales farms—that have a farmer whose primary job is farming but have an average loss of more than $5,700 a year—would see the sharpest fall in net worth, going from $42.5 million to only $19.5 million.”

While these may seem like big numbers, most of the value of a farm is tied up in land and expensive machinery, which are needed to grow food and raise animals. In fact, more than 80% of an average farm’s assets are in real estate alone. Actual cash on hand is much lower, making payment of such taxes extremely difficult or even impossible.

AFBF President Zippy Duvall said, “For many people, their farms are not just their businesses, but they are a family tradition passed down from generation to generation. If a family is forced to sell off its farm piece by piece just to pay estate taxes, they run the risk of eventually losing the farm altogether. We urge Congress to make the estate tax exemption permanent, to enable farm families to continue growing the food and fiber America’s families rely on.”

U.S. farms are closing and consolidating at an alarming rate. The latest Census of Agriculture shows more than 140,000 farms went out of business between 2017 and 2022. Another 20,000 farms have been lost in the past two years, according to USDA.

Read the Market Intel here.

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