USDA’s Farm Service Agency (FSA) Administrator Zach Ducheneaux (cowboy hat) and Montana Acting SED Les Rispens meets with Mitch Konen, and other members of the Montana Grain Growers Association to talk about the Emergency Relief Program (ERP) and other issues on farm near Fairfield, Montana, May 23, 2022. Konen’s sons, Jacob and James raise black Angus.

USDA/FPAC photo by Preston Keres

The Tax Cuts and Jobs Act (TCJA) is set to expire on December 31 and uncertainty surrounds whether and when Congress will act. The USDA’s Economic Research Service (ERS) estimates that farmers could see their tax obligations increase by $8.9 billion if the TCJA is not extended.

Most of the tax increases would result from higher tax rates. This would account for $4.5 billion in additional costs. The loss of the 20% deduction on Qualified Business Income would add an additional $2 billion in tax liabilities. This deduction typically reduces a farmer’s tax liability by 9%.

The change in the Child Tax Credit from $2,000 a child to $1,000 a child costs farmers an estimated $1.25 billion.

The USDA ERS estimates that the average tax liability for farmers with $1 million in sales or more would increase by around $10,624, or approximately 7.5%. For farms with sales between $150,000 and $349,000, taxes would increase 15.6%, or an average of $2,283.

Read more on the expiration of the Tax Cuts and Jobs Act here.