The Tax Cuts and Jobs Act signed by President Donald Trump Dec. 22 is expected to provide tax relief for most farmers, according to John Kran, national legislative counsel with Michigan Farm Bureau.
“There will always be some exceptions to the rule, but we believe that the vast majority of farmers will find at least some tax relief,” he says. “The American Farm Bureau Federation will continue to analyze the bill, but we think it generally follows Farm Bureau policy as approved by our farmer-members.”
The legislation is welcome and past due, says Carl Bednarski, president of Michigan Farm Bureau.
“While the specific provisions in the bill will be analyzed extensively in the coming weeks, we feel that the legislation will be good for farmers and allow them to keep more of their money and preserve the family farm without having to carve it up for tax liabilities,” he says. “Michigan Farm Bureau applauds Congress for passing comprehensive tax reform. Farm Bureau and the ag community worked hard over the past several months with members of the House and Senate to make sure critical tax provisions supported in member policy were included in this bill. Farmers need a tax code that helps level the good times and the bad, and allows for long-term investment in things like land, equipment, buildings, trees and livestock. It appears this bill will better position most farmers moving forward,” he says.
Highlights of the bill
• 21% flat corporate rate
• Section 179 small-business expensing up from $500,000 to $1 million now permanent
• immediate expensing (bonus depreciation) of 100% bonus depreciation through 2022
• deduction for business interest expenses of $25 million gross receipts
• business deduction for state and local taxes for farm businesses (schedules C,E, F)
• depreciation of farm machinery from seven to five years
• 1031 like-kind exchanges for buildings and land
• estate tax exemption doubles to $11 million per individual, indexed to inflation (through 2025)
• stepped-up basis unchanged
• cash method of accounting for farm businesses continues
• loss of Section 199 for farmer cooperative members addressed
Individual income tax rates:
• $12,000 and $24,000, single and joint standard deduction
• 10% above standard deduction
• 12% starting at $19,050
• 22% starting at $77,400
• 24% starting at $165,000
• 32% starting at $315,000
• 35% starting at $400,000
• 37% starting at $600,000
For more information, see IRS Pub 225, Farmer’s Tax Guide.