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Ohio State University Extension


Waiting on 2026

By:Robert Moore, Tuesday, April 11th, 2023

Legal Groundwork

Estate tax laws have seen favorable changes over the last 20 years.  In 2000, the federal estate tax exemption was $675,000 and Ohio estate taxes were due for estates exceeding $338,000.  Today, the federal estate tax exemption is $12.92 million and Ohio no longer has estate taxes as they were repealed in 2013.  Therefore, no estate taxes are owed if an individual’s net worth is less than $12.92 million or a married couple’s net worth is less than $25.84 million.  According to data from the USDA, only 0.2% of farm estates, or about 71 estates, were required to pay estate taxes in 2021.  As this data shows, very few farm estate have had to pay estate taxes in the last few years.

On January 1, 2026, the federal estate tax exemption is scheduled to be reduced by 50%.  This tax sunset is a result of the 2018 tax legislation passed by Congress that doubled the federal estate tax exemption for seven years.  The exemption is indexed for inflation each year so there is no way to know exactly what the exemption will be in 2026 but best guesses are that it will be at least $7 million per person.  While a $7 million estate tax exemption will still protect the vast majority of farm estates from having estate tax liability, the number of farm estates subject to estate taxes will increase significantly beginning in 2026.  This increased threat of estate taxes is the result of the 2026 sunset and the significant increase in farmland values in the last few years.  There is no doubt that if things hold as expected, the percentage of farm estates having estate tax liability will be considerably more than 0.2%.

Congress can act and pass legislation to extend the current exemption beyond 2026 or make the current exemption permanent (with inflation adjustments).  If Congress will address the estate tax exemption is anyone’s guess.  Congress will be lobbied by farm groups and small business groups to extend or make permanent the current exemption amounts, but the effect of such efforts is purely speculative at this point.  Perhaps we will have a better idea of Congress’ intentions after the 2024 elections.

In the next post, we will discuss strategies to help reduce the risk of estate taxes for farms should the federal estate tax exemption sunset in 2026.