Chris Hesse and I recorded an Ag Insights Video on Friday about the American Family Plan. We share some details that may be even more costly for farmers.
Most of you know that President Biden announced the American Family Plan a little over a week ago. Chris Hesse and I did an Ag Insights Video on more details on the plan.
A couple of key points. If President Biden gets his way, all income earned by a farmer over $1 million will be subject to a tax rate of 43.4%. He states it will only be 39.6% but it will automatically have the extra 3.8% net investment income tax applied. This tax was implemented as part of ACA, however, it was to apply only to investment income. Farmers who rented their ground to their farm operation were exempted from the tax. At the time, we surmised that at some point in the future that this tax would apply to all business income including self-rental. If President Biden gets his way, this will be the result.
Second, just because the farm stays in the family, a transfer tax may still apply. Currently, under many parts of the Tax Code, family does not include nephews, nieces and cousins. Therefore, if an Uncle leaves the land to his two nephews since he has no kids, a transfer tax may apply. Also, if the farm goes to three kids but only one kid farms the ground, the other two kids may have to pay a transfer tax. The key will be in the details.
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