AFBF: Estate Taxes Are A Threat to Family Farms

 ...Farms with assets above the estate tax exemption often must liquidate some of those assets to meet estate tax obligations, which can reach as high as 40% of the taxable amount. Estate taxes are a particular concern for farmers and ranchers because they are based on the market value of the asset; given the consistent appreciation in agricultural land and assets, this can be very high for farm and ranch families. A limitation on the estate tax exemption means that each year, fewer and fewer farm families will be protected from the estate tax– a clear risk to the continuity of family farms.

...During 2020, the national average value of farm real estate, including all land and buildings on farms, was $3,160 per acre, unchanged from 2019’s record high. Based on this, it would take approximately 3,700 acres to reach the current $11.58 million estate tax exemption.

Importantly, over the last decade, the value of farmland in the U.S. has increased by nearly 50%, or $1,010 per acre. Given that increase, it would take 32% fewer acres to reach the estate tax exemption level in 2020 than it would have in 2010.

Based on the most recent Census of Agriculture, more than 74,000 family farmers were operating 2,000 or more acres in 2017, suggesting that approximately 3.6% of the more than 2 million family farms could potentially have farm assets that exceed the estate tax exemption. These 74,000 farms operate more than 449 million acres, indicating that nearly 50% of the farmland in the U.S. could face increased liquidation pressure upon the transfer of assets at death.

Realizing that on average 15% of total farm assets come from assets other than real estate such as farm machinery or livestock, these numbers actually understate the number of family farms that could have assets that exceed the estate tax exemption. If the current $11.5 million estate tax exemption level is not made permanent, in 2026 the estate exemption would fall to an inflation-adjusted $5 million. In 2020 dollars, the $5 million exemption level would be approximately $5.8 million, pushing the threshold for triggering the estate tax down to approximately 1,800 acres. When evaluating this threshold on a state-by-state level, more than 156,000 farms, or nearly 8% of farms would be impacted. These farms account for more than 582 million acres, indicating that as much as 65% of farmland could be operated by farms above the inflation-adjusted $5 million estate exemption level.

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