The old adage that there is nothing certain but death and taxes is not quite true. While to be sure there will be taxes, farmers and ranchers face quite a bit of uncertainty over their taxes. Congress left Washington last week for election campaigning with no resolution of major tax issues. According to American Farm Bureau Tax Specialist Pat Wolff planning for 2011 taxes has never been as dicey.
"Up in the air is what estate taxes will be, what capital gains taxes will be, and what individual income tax rates will be," Wolff said. "That makes planning for next year nearly impossible."
Wolff says the last week in December is not a time that an estate tax plan can be written that would go into effect in less than a week. She says people will have to work out a couple of different scenarios depending on what the actual tax rate will be on Jan. 1, 2011.
The House passed a new $3.5 million individual estate tax exemption with a top rate of 45%. The Senate didn't act, and Wolff notes neither body has acted on income tax rates as the pre-election debate rages over whether to let the Bush-era tax cuts expire for some.
"The President has proposed drawing a line," Wolff said. "Saying that anyone who makes more than $200,000 as an individual or $250,000 as a couple would end up paying higher taxes."
But without a deal, capital gains and dividend taxes would also rise with capital gains going to 20% from 15% and dividend rates rising from the same level to 39%.
"A consideration with the capital gains tax is whether you sell property," Wolff said. "If folks know that the rate is going to increase on Jan. 1, that might influence some decisions about whether to make a sale that was pending."
The political question is who deserves the lower rates. President Obama and many Democrats back the lower rates only for those below the $250,000 threshold. Republicans and some Democrats argue it's not the time to raise anyone's taxes with the economy still suffering.