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Under Biden’s change, heirs would be forced to pay taxes on the appreciation of assets, potentially over the entire lifetime of the recently deceased relative.
President Joe Biden has proposed amending the inheritance tax, also known as the “death tax,” but farmers around the country are raising concerns about the plan.
In the American Families Plan introduced earlier this year, Biden proposed repealing the “step-up in basis” in tax law. The stepped-up basis is a tax provision that allows an heir to report the value of an asset at the time of inheriting it, essentially not paying gains taxes on how much the assets increased in value during the lifetime of the deceased. This allows heirs to avoid gains taxes altogether if they sell the inheritance immediately.
Under Biden’s change, heirs would be forced to pay taxes on the appreciation of the assets, potentially over the entire lifetime of the recently deceased relative.
The tax change is targeted at wealthy heirs receiving their parents’ fortunes. Generational farmers, though, say the repeal of this provision will leave them with a hefty tax when their parents pass away and hand down the family farm.
“When it comes to passing down a family farm to a niece or a nephew, the tax liability can result in selling the whole farm or significant pieces of the farm off simply to pay the tax bill,” said Chris Hagenow, vice president of Iowans for Tax Relief. “There is no question that an inheritance tax is a significant burden on families’ farms and their continuity.”
Biden’s proposal applies only to inheritances totaling more than $1 million, but the total value of the large plots of land owned by farmers can put them in that category.
“Democrats have pledged to repeal ‘stepped-up basis,’ which is what makes it possible for a family business – like a farm – to pass from one generation to the next without being forced to sell off assets to pay an enormous tax bill to Washington,” Ways and Means Minority Leader Rep. Kevin Brady, R-Texas, said.