The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Here We Go Again!
Apr 10, 2013
It seems like it was only three months ago that we had a new law making the lifetime estate tax exemption $5.0 million indexed to inflation ($5.25 million in 2013). Wait! It was only three months ago.
President Obama today release a 2014 budget proposal calling for changes to this "permanent" law. Beginning in 2018, the budget would return the estate tax laws back to 2009 levels. This would result in a $3.5 million lifetime exemption (not indexed for inflation) and a 40% tax rate.
Based on assumed 3% inflation rate, we estimate that the current lifetime exemption would increase to $6 million in 2018. If the President's proposal goes into effect, about $2.5 million of additional estate value would be subject to a 40% estate tax.
The proposal also calls for certain "loopholes" to be closed. Most likely these relate to discounts for private entity gifts and estate values and other related items (these "loopholes" are always in these types of budget proposals, but rarely get passed).
On the direct farming side, the President's proposal, as expected, calls for the elimination of direct payments (saving about $3.3 billion per year ) and a reduction in crop insurance premium subsidies by about $500 million in 2014 rising to slightly more than $1.25 billion a couples years thereafter.