Farmers Face Potential $10 Million Drop in Estate Tax Exemption by 2029

Farm CPA Paul Neiffer advises Tennessee producers to begin updating estate plans immediately in preparation for potential federal tax changes that could take effect in 2029. Neiffer told RFD-TV that the shift in congressional control following the 2026 midterm elections creates a new political environment in Washington that could impact farm tax policy.

Democrats now hold the majority in both the House and the Senate. Neiffer said this shift, combined with President Donald Trump’s veto power, makes major tax policy changes less likely in the immediate term. However, he noted that the larger risks for farm families may emerge after the 2028 presidential election, depending on which party controls the White House and Congress.

One of the primary concerns Neiffer identified is the federal estate and gift tax exemption. Under current law, the basic estate and gift tax exclusion is set at $15 million per individual for 2026. This figure reflects changes enacted in 2025. Neiffer warned that a future Democratic-controlled government might reduce that exemption to $3.5 million or $5 million.

A reduction in the exemption amount would change the financial landscape for families transferring farmland and other appreciated assets. Neiffer also raised concerns about possible changes to stepped-up basis rules. These rules currently allow inherited property to receive a new tax basis tied to its fair market value at the owner’s death. Changes to these rules could create additional capital gains tax exposure for heirs.

Neiffer pointed to other potential areas for tax adjustment, including Social Security payroll taxes. He said Congress could subject more farm income to the 12.4% Social Security payroll tax. Such a change might remove the current income cap, affecting how producers calculate their payroll obligations.

Equipment depreciation rules are another area where producers should monitor legislative activity. Current law provides a permanent 100% first-year depreciation deduction for qualifying property acquired and placed in service after January 19, 2025. Neiffer said a future Congress might roll back some of these benefits as part of broader tax reform. Changes to depreciation rules could affect the timing and financial benefits of major equipment purchases or business investments.

The immediate outlook for a new Farm Bill is also uncertain. Neiffer noted that disagreements between Republicans and Democrats could complicate negotiations in the current session. He believes the political dynamics will shift again after the 2028 election, which is why he urges producers to prepare now rather than waiting for new legislation to pass.

Neiffer cautioned that Congress could potentially make future tax changes retroactive. This means waiting until 2029 to implement planning strategies could be too late for some farms. He encouraged farm families to consider whether making gifts sooner could help protect their estates under current rules.

“I think what they should be doing is working with their CPA and their estate tax attorney to sort of get it in place,” Neiffer said. He added that producers do not necessarily need to make major estate transfers immediately, but they should have plans prepared so they can act quickly if the political and legislative outlook changes.