Ag Policy Blog

OMAHA (DTN) -- The House Ways & Means Committee approved its tax provisions on Wednesday for the budget reconciliation package now dubbed the "One Big Beautiful Bill."

The tax package is estimated to cost $4.5 trillion over ten years. The biggest hang-up for the bill likely remains concerns from some Republicans over the cap on state and local taxes (SALT) deduction.

The bill includes multiple changes that would reduce taxable income for farmers and small businesses and make it more attractive to invest in new equipment as well.

DEDUCTION OF QUALIFIED BUSINESS INCOME

Current law allows a 20% deduction of qualified business income for partnerships, S corporations and sole proprietorships.

Under the bill, the deduction would increase from 20% to 23% starting in 2026 and be made permanent. The House Ways & Means Committee noted 98% of farms qualify as pass-through entities for the deduction.

BONUS DEPRECIATION

The value of bonus depreciation has been declining in recent years, falling from 80% in 2023 down to 40% in 2025.

Bonus depreciation can be used for farm machinery, vehicles, and certain 20-year property improvements such as fencing. Real estate property does not qualify.

The new bill would allow 100% bonus depreciation for qualified property acquired on or after Jan. 20, 2025, until Jan. 1, 2030.

SECTION 179

Current law caps Section 179 business deduction at $1.25 million for 2025 and the amount is reduced by the costs of other property put into service that year that goes above $3.13 million. Qualifying property is generally considered as machinery or equipment, business vehicles, computers and office furniture.

Under the bill, the Section 179 deduction would increase to $2.5 million and the cap on qualifying property put into service would rise to $4 million. Both figures going forward would be adjusted for inflation. That would apply to property put into service starting Jan. 1, 2025.

1099 RULE

Currently farmers and other businesses are required to issue a 1099-Misc for any payments over $600. This provision has a large impact for small businesses who contract briefly for labor. This provision became a complication in the 2024 tax year and ended up being waived. The new provisions would increase the minimum for a 1099-Misc to $2,000.

INTEREST EXCLUSION ON LOANS SECURED BY RURAL OR AGRICULTURAL LAND

A smaller version of a provision championed by the American Bankers Association, dubbed the "Access to Credit for Our Rural Economy, or (ACRE) Act, the bill allows a partial exclusion of interest on certain loans secured by rural or agricultural real estate. Specifically, the bill allows an exclusion of 25% of the interest received by a qualified lender.

ESTATE TAXES

The bill would increase the estate tax exemption to $15 million for single filers and $30 million for married couples starting in 2026 and the exemption would be indexed for inflation.

The House Ways & Means Committee stated this would prevent the Death Tax from hitting more than 2 million family farms who otherwise would have seen their exemption cut in half.

In 2022, the last year tax data is available, there were 3,170 estates valued at a combined $123.3 billion that filed taxable estate-tax returns. Of those taxable estates, 379 of them had farm assets valued at $2.7 billion. In contrast, estate tax forms for 2022 also showed 693 taxable estates also reported holding $3.7 billion in art assets.

The lion's share of taxable assets for those estates in 2022 consists of stocks, bonds, cash and other real estate property. Farm assets accounted for $647 million in taxes paid out of the $22.5 billion in total taxes paid, or about 2.9% of the total.

House Ways & Means: https://waysandmeans.house.gov/…

Also see, "House Ag Committee Passes Farm Bill Reconciliation Package Along Party Lines,"

https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

(c) Copyright 2025 DTN, LLC. All rights reserved.