The framework includes repealing the death tax
By Diego Flammini
News Reporter
Farms.com
President Trump’s framework for tax reform could be good news for farmers.
The nine-page document released earlier this week outlines a number of tax reform goals, including “tax relief for businesses, especially small businesses.”
One particular item that may be of interest to farmers pertains to Section 179 of the IRS tax code. Currently, farmers can write off $500,000 worth of machinery and equipment.
But under Trump’s tax reform plan, farmers could write off even more.
“One thing that’s been contemplated is increasing the immediate expensing for equipment and machinery,” Matt Van Essen, a partner with Van Bruggen & Vande Vegte, an Iowa-based agricultural accounting and tax firm, told Farms.com today. “(The government) is considering not having a limit so farmers can write off as much equipment and machinery as they purchase in that year.”
Producers should be aware the government could implement a limit somewhere else to offset the Section 179 provision.
“They’re considering limiting how much interest a farmer can deduct,” Van Essen said. “That would be a negative for farmers because it could increase their taxable income.”
Another element of the President’s tax reform framework that could benefit farmers includes repealing the death tax and the generation-skipping transfer tax.
There is currently a lifetime state exemption of about $5.5 million per individual and $11 million per married couple, Van Essen says, meaning that amount would not be subject to the estate tax.
“For farmers it could be beneficial because if the estate tax applies, it could be 40 percent of whatever the taxable estate is over the (amount depending on if the individual is married or not).
Farm groups are encouraged by the early framework
Some farm groups around the U.S. have come out in support of the President’s plan.
The potential repealing of the death tax means succession planning could be a smoother process, according to Troy Stowater, president of the Nebraska Cattlemen Association.
“Families have worked very hard and one thing to do to leave a legacy is to pass on that farm or ranch so (repealing the death tax) would help bring those young people in because we can eliminate that additional cost,” he told WNAX yesterday.
And the American Farm Bureau Federation (AFBF), while encouraged by the tax reform framework, wants to be involved in the legislation’s refinement.
“Farm Bureau looks forward to working with tax writers to refine the proposal to ensure that tax reform lowers effective tax rates for farm and ranch businesses,” AFBF president Zippy Duvall said in a Sept. 27 statement.
Secretary of Agriculture Sonny Perdue also praised the President’s tax proposal and its potential implications for U.S. farmers.
“Most family farms operate as small businesses, with the line between success and failure frequently being razor thin. Add to that the complexity and costs of merely complying with the tax code, and their budgets are stretched even tighter,” he said in a Sept. 27 statement. “On top of it all, the unfair ‘Death Tax’ can cause too many family farms to be broken up and sold off to pay the tax bill, undoing lifetimes of toil and preventing further generations from carrying on. President Trump is right to push for reform and reductions in the tax code—an overhaul that is long overdue.”