An Analysis of the Effect of Sunsetting Tax Provisions for Family Farm Households

Two recent laws enacted temporary provisions to the Federal tax code: the American Rescue Plan Act (ARPA) and the Tax Cuts and Jobs Act (TCJA). The authors of this report assess the impact of these expired and expiring Federal income and estate tax policies on tax liabilities for farm households. The authors estimate that the expiration of the temporary provisions of the ARPA and TCJA would increase farm households’ Federal income tax liabilities by $8.9 billion and estate tax liabilities by $647 million the year following expiration. The change in tax liabilities varies by farm size and for groups of farmers considered underserved by USDA programs. This analysis suggests that the combined effect of the sunsetting of reduced individual income tax rates, the increased standard deduction, a cap on State and local tax deductions, and the elimination of the personal exemptions would have the largest impact on underserved and all other farm households, except for very large farm households identified as those with annual gross cash farm income above $5 million. For these very large farm households, the sunsetting of the qualified business income deduction (QBID) would result in the largest increase in tax liabilities.