Agriculture and the One, Big, Beautiful Bill

Many Tax Cuts and Jobs Act (TCJA) provisions are scheduled to expire at the end of 2025 and, if they are allowed to do so, there may be significant collateral damage to the tax situations of production ag, private elevators, and supply dealers and cooperatives. The One, Big, Beautiful Bill provides several extensions and enhancements to the TCJA’s provisions that could be significant to agribusiness.

How could the ag industry be impacted most by the tax bill?

Estate tax implications

The federal estate tax limit is increased to $15 million per individual and is also indexed for inflation. Farmers generally have the bulk of their wealth tied up in nonliquid assets.

Too often, the ability to pay estate tax is dictated by how willing the heirs are to sell a farm. For producers that are land rich and cash poor, allowing the existing provisions to expire to an estimated $7 million exemption would make the ability to pay estate tax and save the family farm difficult.

Bonus depreciation

100% bonus depreciation is revived for assets placed in service on or after January 20, 2025 (Inauguration Day) and before January 1, 2030. Currently, assets placed in service in calendar year 2025 are only allowed a 40% bonus depreciation deduction.

Section 179 deduction

The Section 179 deduction increased to $2.5 million, with a $4 million total purchase limit before phaseout begins. Rising equipment costs have seen the previous $1.25 million limit become too small for large producers. Prior to the changes in equipment trade rules, which changed the depreciation basis from the net amount of cash paid (boot) to list price of the equipment, this was not as large of an issue. List price presents a far greater issue when it comes to meeting Section 179 limitations.

In many cases, the current limit covers a combine and maybe the heads. Combine that with a producer that rolls their equipment line each year and the reductions in bonus depreciation, and you have a situation where equipment purchases do not look as tax efficient. An increase in Section 179 could benefit producers greatly, especially in those states that allow for Section 179, but not bonus depreciation.

Interest expense deduction

The limitation of interest expense deduction has been a challenge for some agribusinesses, specifically in the cooperative space in recent years as the calculation morphed to exclude the addback of depreciation. The bill revises the math to addback depreciation, amortization, and depletion in calculating adjusted taxable income for purposes of the business interest limitation, effective for tax years beginning after December 31, 2024, and before January 1, 2030.

Health insurance provisions

For those producers who maintain their health insurance through the marketplace and receive premium tax credits, tax planning can be interesting as attempts are made to dial into the reported income number from the previous November and avoid payback of some or all of the Premium Tax Credit. The bill eliminates the limitation or ceiling on recapture of the credit at certain levels and requires payback based on full calculated amounts.

Energy credits

Various residential energy and EV credits are eliminated effective December 31, 2025. Technology-neutral investment tax credits and production tax credits generally are disallowed for any qualified facility for which the construction begins after the date which is 60 days after enactment of the bill or which is placed in service after December 31, 2028.

How we can help

Keep in mind that all of these items are still subject to much more negotiation, debate, and reconciliation. We will continue to post as updates occur.