Earlier we’ve heard from Sarah Windham, Sr. Tax manager with Dixon, Hughes and Goodman, with offices in North & South Carolina about tax changes for 2013 in capital gains and other areas. There was much ado over the estate tax rates that were due to expire at the end of last year. While the Bush-era reduced rate was high the rates the estate tax would have reverted back to would have been financially devastating for most farm operations. With the passage of fiscal cliff legislation in January 2nd, that problem has been laid to rest for good says Windham:
“That was a huge deal for a lot of farmers with the fiscal cliff and the sunset of those tax provisions in 2012 estate taxes. We had a $5 million estate tax exemption in 2012 that would expire at the end of the year and there was a lot of speculation on where it would hit and what kind of extension we would get. For now, they have permanently made it $5 million. That is adjusted for inflation, so each year, there will be a small increase to that amount, per inflation, and a 40% tax rate.”
Because farmers are notoriously asset rich and cash poor:
“That can be a huge deal for farmers who have a lot of wealth tied to their machinery and equipment or their land, and they are not very liquid and have a lot of cash to pay estate taxes.”
And while the estate tax, capital gains and changes in depreciation are the major tax implications for farmers, Windham stresses that there’s others:
“There are a lot of other factors and changes and extension modifications, in that tax bill. I would stress that everyone needs to speak to their CPA and make sure they are aware of different ones that may affect them.”
Sr. Tax Manager with Dixon, Hughes & Goodman, Sarah Windham on Inside Agriculture.