It’s pretty much a given that with every new presidential administration, the direction for major national policy will see some changes. Many of those policies have an impact on agriculture in one way, shape or form. Some of the initial language of President Joe Biden’s tax plan have farmers concerned, especially when it comes to something called stepped-up basis.
“Stepped-up basis is used when you inherit an asset, where instead of the tax basis being applied for what an asset was originally purchased for, the basis gets stepped up to the market value at the time of inheritance,” said Brandon Kern, senior director of state and national policy with Ohio Farm Bureau. “For example, if Dad bought farmland for $2,000 an acre 30 years ago, you could inherit that farm now worth $7,000 an acre. Stepped-up basis says that at the time you inherit that farm, that $7,000 an acre becomes the basis for what you could be taxed for that asset should you sell it and achieve a capital gain.“
For decades, stepped-up basis has created a significant tax break for those inheriting an asset such as farmland, and the removal of it could put a huge burden on family farms across Ohio, which often find themselves land rich and cash poor.
“After a farm is passed down, some upgrades to equipment or technology may be needed to keep the operation running efficiently,“ Kern said. “That may require selling off some ground in order to generate the capital to make those upgrades. Without stepped-up basis, showing the capital gains for the sale of that land is a pricey tax proposition and could hinder that farm’s progress.“
Kern said Farm Bureau is watching this issue vigilantly, and he and his team will activate members to make their voices heard should actual proposals come forward that would make these detrimental changes to current tax policy.