The enactment of the Tax Cuts and Jobs Act (TCJA) in 2017 included provisions largely viewed as positive for the agricultural sector. Many of those provisions, especially those for individuals and households, are set to expire this year. President Trump has made extending TCJA provisions a core issue.
With complete control in Washington, Republicans plan to use the budget reconciliation process to quickly extend the tax cuts passed by Congress in 2017. Budget reconciliation is an expedited process for considering spending bills. Instead of needing 60 votes, a reconciliation bill only needs a simple majority in the Senate.
However, passing a major tax bill through the House may prove difficult due to internal GOP disagreements over provisions such as the State and Local Tax Deduction, which could derail tax reform efforts.
Preparation is Key Ahead of Change
Pinion’s tax team has compiled a list of preparations for businesses to tackle ahead of potential changes.
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Get organized: Update your books, gather harvest information, plan upcoming income/expenses, and schedule a meeting with your tax pros.
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Consider all of your options: Work with your tax professionals to identify your strategy for your income taxes.
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- Consider deferring income and minimizing tax: If applicable and appropriate for your situation, consider tax reduction and deferral tools such as farm income averaging, deferral of crop insurance proceeds, or livestock sales due to disaster, bonus depreciation on capital expenditures (60% for 2024 and 40% for 2025), utilizing deferred payment contracts, prepaying expenses prior to the end of your tax year, and charitable giving of commodities.
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- Consider paying tax now: With individual tax rates set to increase in 2026, it may be better to accelerate income into 2025 and pay tax sooner at lower rates.
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- Think long-term: Engage in discussions with your advisors on whether any changes are needed to help you meet your goals. Regardless of what legislation is ultimately passed, 2025 is a good year to evaluate entity structures and make sure your structure is best for your goals and your tax position.
“With the looming expiration of key provisions in the Tax Cuts and Jobs Act, it’s imperative for those in the agricultural sector to get organized and start planning early,” said Brain Kuehl, director of government and public affairs at Pinion.
“This preparation will be crucial to navigating the uncertainties and ensuring the continuation of benefits that support farm operations.”
Maintain Flexibility
It is not uncommon to have late tax “extender” packages, tax bills pass with retroactive rules, etc.:
- Consider extending your business and personal returns to see if there is changing legislation that will impact you, get a glimpse at the next year’s operating results, etc. before finalizing prior year tax returns.
Define and Communicate Your Objectives
Whether you’re nearing retirement, planning to transition out in 5-10 years, or in growth mode, clearly defining and sharing your objectives is vital in today’s political climate.
“It is vital to clearly define and communicate your objectives, especially in a political climate filled with uncertainties. Understanding how shifts in policy might impact your retirement or succession plans can help mitigate future risks.” notes Kuehl.
“If you’re in growth mode, capitalizing on current opportunities available is a necessity. Today’s ever shifting and unpredictable political environment means opportunities could evaporate.”
Reach out to a Pinion tax advisor with questions, or to discuss your unique tax strategy, with consideration of potential regulation changes, market volatility, and long-term goals.
