However, the transfer of a family farm to a family member who continues the operation would not result in a tax at death. Gains above these exemption amounts would be subject to tax at death. The change, which was included in the American Families Plan (AFP), would end stepped-up basis for gains above $1 million for the estates of individuals or $2 million for married couples. Under current law, most inherited assets receive a step-up in basis, which means the tax basis-the amount for determining gain or loss-of property transferred to an heir at death is increased to its current fair market value at the date of death, eliminating any capital gains tax liability on those inherited gains. This chart appears in the ERS Topic Page, Federal Estate Taxes, published in April 2023.Ī proposal to change the way capital gains are taxed at death would affect family farm estates differently according to the size of the farm. The exemption amount was increased to $12.92 million per person in 2023. Total Federal estate tax liabilities from the 87 farm estates owing taxes are forecast to be $566 million in 2022. Of those estates, ERS forecasts that 305 (0.77 percent) will be required to file an estate tax return, and a further 87 (0.22 percent) will likely owe Federal estate tax. Researchers from USDA, Economic Research Service (ERS) estimate that in 2022, 39,534 estates were created from principal operator deaths. However, only returns that have an estate above the exemption after deductions for expenses, debts, and bequests will pay Federal estate tax. Under the present law, the estate of a person who owns assets above the exemption amount at death must file a Federal estate tax return. In 2022, the Federal estate tax exemption amount was $12.06 million per person and the federal estate tax rate was 40 percent.
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