When Democrats talk about increasing the estate tax, they talk about “rich people” and not the family farm. But the family farm is impacted. When was the last time you heard someone accuse a small farmer of being rich?
President George W Bush enacted a temporary tax cut that set the estate tax on inherited assets at 35 percent after a $5 million exemption.
President Barack Obama wants to raise the rate to 45 percent after a $3.5 million exemption.
If no changes are enacted before year-end, the Bush rates expire. The estate tax rate prior to the Bush tax cuts was 55 percent after a $1 million exemption.
A recent article from the Michigan Farm Bureau reports that the average price of Michigan agricultural cropland is $3,500 per acre.
Using that benchmark, 285 acres is worth $1 million. If you add in the home, outbuildings, and equipment, the value zooms upwards.
Based only on land value, it would take 1000 acres to reach the $3.5 million and 1450 acres to reach the $5 million threshold.
Are you in favor of forcing the sale of family farms to pay estate taxes? What should Congress and the President be doing to protect the family farms?
A spouse may be able to inherit the farm without paying an estate tax. It’s different when children or other family members (and non-family) inherit. Estate tax law is complicated. Michiganders pay a federal estate tax, but no Michigan estate tax. It is always a good idea to consult a tax expert before making decisions on tax planning.