In April, President Biden introduced the $1.8 trillion American Families Plan to help grow the middle class, expand benefits of economic growth, and make the United States more competitive. This plan includes changes that could affect some people in agriculture. Ruby Ward is an agriculture entrepreneurship specialist with USU Extension. She joins me today to talk about how this plan would affect agriculture.
First, tell us about some provisions that were proposed by this plan that affects agriculture.
Ruby Ward- So this will get a little technical- but it's hard to discuss this without knowing what some of the current tax provisions are.
In the American Families Plan, several provisions were proposed. It had stuff that would affect the estate tax- currently, you can transfer just over $11 million in an estate without paying any estate taxes. So, in the American Families Plan, President Biden proposed we decrease the estate amount to $1 million. But they also changed another provision in there and treat it as if you sold it to your heirs.
You have to pay capital gains tax, it's lowering the exemption, and I won't get in too far in this, but it's also increasing the tax rates that you would pass it on above that $1 million exemption. They were thinking about doing a provision that allows passage of a farm estate to the heirs, and they would defer the tax into the future- as long as a family member continued to farm that land. That's where we get into the complicated factors.
Shalayne Smith-Needham- We'll let's talk about some of those complicated factors in having a deferment for family farms?
RW- In the way that it was proposed, we have some vague ideas. So, it's a family member; but he didn't define what a family member was. And in the IRS tax code, there's not any provision for a family member, there is a provision for a related person. And so, there are unknowns as to what is a family member.
SSN- While we're talking about complicated factors and having a deferment, tell us who might be affected by these potential changes.
RW- Some of the biggest ones to be affected, I think, are our small business owners and our family farms. If your estate holds a lot of various stocks, then that's more divisible. You can sell part of the stock fast, and life can go on.
With a small business, once they pass that estate on to the next generation, a million dollars doesn't go very far when we start to talk about assets, like a building. It sounds like a lot of money, but when you start to think about having intact businesses, you can quickly get past that 1 million dollars.
SSN- Well, this is quite a complex subject; I'm sure people would like to know where to find more can find information online.
RW- Educate yourself. Just look in American Families Plan estate taxes provisions and see what comes up.