Final IRS Inflation Adjusted Data is Released

We had provided some estimates on IRS inflation adjusted data recently, but the IRS has now released the official data.  Here are some of the items of most interest to farmers and other taxpayers:

  • The top 39.6% tax rate begins at $480,050 for married couples and $453,350 for singles.
  • Standard deduction is $13,000 for married couples and $6,500 for singles.
  • Personal exemptions increase from $4,050 to $4,150 (note tax reform proposes to eliminate the personal exemption).
  • Section 179 deduction does increase to $520,000 with phase-out beginning at $2,070,000.  If you spend more than $2,590,000, then no Section 179 is allowed.
  • Section 2032A valuation adjustment used to reduce farm real estate values on estate tax returns is capped at $1,140,000.
  • Annual exclusion for gifts bumps up from $14,000 to $15,000 per donee.  Remember this is your limit for each person you gift to, not your overall limit.  If you want to give $15,000 to 12 kids and grandkids, there is no gift tax return to file and it does not reduce your lifetime exemption amount even though the total amount given away is $180,000.
  • Lifetime estate tax exemption increases to $5.6 million.
  • 401(k) contribution limits are increased from $18,000 to $18,500 (note tax reform talks about reducing this to $2,400 or eliminating the deduction altogether).

Separately, the IRS did formally withdraw their new proposed regulations under Section 2704.  These regulations would have curtailed the amount of discounts farmers could take on transferring entities either during lifetime or at death.  This is a very welcome announcement (or until a new administration brings it up again).

The maximum amount of Self-employment FICA tax will now be $15,958.80 ($128,700 times 12.4%) up from $15,772.80.

 

  • Principal
  • CliftonLarsonAllen
  • Yakima, Washington
  • 509-823-2920

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation.

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