PARKER, COLO. (RFD-TV) — Changes to federal tax policy could have major implications for farm families planning to transfer land, equipment, and other assets to the next generation.
Farm CPA Paul Neiffer says one provision worth watching is the step-up in basis, particularly if Democrats gain full control of the federal government following the 2028 elections. He joined Market Day Report to discuss how potential changes could affect estate planning and why farmers should begin preparing with their tax and legal advisers.
Capital Gains Tax at Death Could Change Estate Planning
In his interview with RFD-TV, Neiffer said previous proposals during the Biden administration included changes that would tax unrealized capital gains when assets are transferred at death or through lifetime gifts.
He explained that such a change would not necessarily eliminate the step-up in basis itself. Instead, heirs or estates could face a capital gains tax on appreciation that occurred during the previous owner’s lifetime.
Potential tax rates could vary significantly, with Neiffer citing possibilities ranging from 20 percent to as high as 45 percent. He said proposals have also included a possible $5 million exemption and additional relief for farmers, although the details remain uncertain.
“Step-up in basis is very important to our farmers, but if this does happen, they’re going to end up paying the tax in order to get the step-up,” Neiffer said.
Under current federal tax rules, inherited property generally receives a basis adjustment to its fair market value at the owner’s death. No change to that treatment is established by the scenario Neiffer discussed.
Farm Families Could Face Significant Tax Bills
Neiffer said changing the treatment of inherited assets could create substantial tax consequences for families transferring farmland, machinery and other agricultural property.
Even if lawmakers establish an exemption, estates exceeding that threshold could face capital gains taxes on appreciated assets.
For farm families with significant land holdings and long-held assets, those potential liabilities could affect how and when they transfer ownership to the next generation.
Neiffer cautioned that the details would depend on the final legislation, including the size of any exemptions and the applicable tax rates.
Start Planning Before 2028
Neiffer encouraged farmers to use the next two years to work with their CPAs and estate-planning attorneys to develop a framework for possible changes.
He said waiting until after the November 2028 election could leave families scrambling to put plans in place if legislation moves quickly.
“If you don’t have that framework in place and you try to pull the trigger with two months at the end of 2028, the attorneys are going to be swamped. The CPAs are going to be swamped,” Neiffer said.
He recommended getting plans and professional relationships established now so families have options available if the tax rules change.
Neiffer estimated there could be a greater than 75 percent chance of a change of this kind if the political conditions he described materialize. That remains his assessment, not an enacted policy or certainty.
Neiffer said the future of step-up in basis will depend on the outcome of future political and legislative decisions. He encouraged farmers to follow the issue and understand how potential changes could affect their individual operations.
He also shared additional analysis on the topic on his blog, FarmCPAReport.com.
