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Updated 2013 Estate and Gift Tax Inflation Adjustments

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October 28th, 2012

The IRS recently released Revenue Procedure 2012-41 that outlined all of the inflation adjusted items contained in the tax laws.

There were a couple of provisions related to gift and estate taxes that apply to farmers.

Beginning in 2013, you can now give up to $14,000 any individual(s) during the year and not have to report this on form 709.  If you give more than this amount, you are required to file a return, however, in most cases, this gift will still be free from gift taxes.  You could give $13,000 in 2012.  Although this amount is adjusted for inflation, it does not change until the amount increases by more than $1,000.  Therefore, the next increase will be to $15,000 and this will probably take three or more years assuming current inflation rates.

Another estate tax adjustment is in regards to special use valuation.  This relates to how much you can reduce your estate value for farmland (or other business real estate).  For most farmers that own a fair amount of farmland may qualify for this valuation method.  However, as discussed in previous posts, there are many requirements that must be met and you may decide not to use it.

For 2012, the maximum amount you could reduce your estate by was $1,040,000 up from $1,020,000 in 2011.  For 2013, this amount has increased to $1,070,000.

With the schedule reduction in the lifetime exclusion to $1 million beginning in 2013 (assuming Congress does not change it), the use of this special method to value farm property may increase dramatically.

Paul Neiffer, CPA

Paul Neiffer

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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