Everyone can benefit from a practical reminder from time-to-time. In this case, Paul Neiffer wants to remind farmers that the 2017 Tax Cuts and Jobs Act is set to expire at the end of 2025.
“We’ve had these tax cuts for eight years now, but farmers may not be thinking about this and what it could mean for them,” said Neiffer, principal of FarmCPAReport.com and a Top Producer columnist.
Neiffer addressed the topic of what farmers need to know now and address from a tax standpoint during the 2025 Top Producer Summit in Kansas City.
“Certainly, farmers are aware of the lifetime estate tax exemption dropping in half after this year. But I think a lot of these other provisions that would hit them, they’re probably not quite as aware of them,” he said.
Neiffer highlighted three provisions he believes U.S. farmers are likely most interested in seeing extended or made permanent. They include:
1. The 100% Bonus Depreciation. Neiffer said he believes the 100% provision will be made permanent, though it’s currently only 40%.
“We think that will come back to farmers,” he said. “The practical benefit is when they purchase equipment or farm buildings they’ll be able to deduct 100% of that item in the year of purchase. Also, there is a chance that trade-in of farm equipment will be similar to the old rules and non-taxable in most situations.”
2. The increase in the lifetime exemption for estates. If the current law is left unchanged, as of Jan 1, 2026, the present lifetime estate and gift tax exemption will be cut approximately in half. It currently is almost $14 million.
Neiffer is optimistic about the exemption. “I think the likelihood on the estate exemption is very good. I think that’ll stay at least at the current level,” he said.
3. The Section 199A Cap. This provision allows individuals, trusts and estates with pass-through business income to deduct up to 20% of qualified business income (QBI) from taxable ordinary income. Schedule F farmers are also granted the 20% deduction.
While Neiffer said there is some bipartisan support in Congress for extending the Section 199A deduction beyond 2025, he is ambivalent about that happening. “With that 20%, it would be a lot more costly to enact,” he noted.
Practical Next Steps Farmers Can Take
Looking ahead, Neiffer said he believes the likelihood of having a major tax bill before the end of 2025 is slim. At best, the bill would be ready by November or December.
For that reason, Neiffer’s recommendation to farmers is for them to plan on pushing income into 2026 but to have the flexibility to bring that income back into 2025.
“The reason is if the tax cuts don’t get extended that means 2026 tax brackets are going to be a lot higher,” Neiffer explained. “So, we would want to bring income into 2025. Now, farmers have the ability to do that using deferred payment contracts and some other elections that they can make – but only if they plan ahead accordingly. They definitely want to make sure they do that,” he added.
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