Four Ways the New Tax Bill Might Affect Your Farm
Barbara O’Neill, Professor and Rutgers Cooperative Extension Specialist in Financial Resource Management, has analyzed the newly passed Tax Cuts and Jobs Act (TCJA), says Richard VanVranken, Professor and County Extension Department Head of Rutgers Cooperative Extension of Atlantic County in New Jersey. In the process, O’Neill found some information about the law’s impact on growers. She says there are four key impacts for agriculture:
- Increased (doubled) federal estate tax exemption: $11.2 million for individuals and $22.4 million for a couple (2018 figures), with proper estate planning.
- 20% deduction on co-op payments to farmer members.
- Lower tax rates for pass-through business income (new Section 199A deduction); “pass-through” businesses include partnerships, LLCs, S corps, and sole proprietorships.
- New farm equipment depreciation schedule: five years instead of seven.
Many of these changes are complex. O’Neill advises consulting with a professional tax advisor to determine how they affect you personally.
O’Neill says if your municipality is able to collect property tax prepayments, prepayments will be deductible on your 2017 tax bill. However, state and local income taxes are specifically excluded in the new law, so prepayment of 2018 income taxes are not deductible on your 2017 tax bill.
She suggests consulting with your professional tax advisor to determine if prepayments will benefit you.