What the One Big Beautiful Bill means for ag

The One Big Beautiful Bill Act passed with what appears to be a whole lot of changes from both a tax perspective and government programs affecting farmers. The bill has received substantial media coverage, but what are the key takeaways concerning ag? Some provisions sound good on paper but have limited usefulness to the bulk of ag producers. Other provisions may not sound like much but could have significant impact on some farm operations.

The bill strengthens the farm safety net and commodity support programs, like the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, raising reference prices by 10–21%, with wheat seeing an increase of about 15%. Attempting to make insurance more affordable, crop insurance premium support increased by 3-5% across coverage levels. Additionally, producers enrolled in ARC can now also opt for the Supplemental Coverage Option as a crop insurance alternative, offering potential planning advantages when evaluating crop insurance and Farm Service Agency programs. As part of these changes, there is opportunity to expand eligible base acres for operations where it makes sense. This may make a large difference to a limited number of farms for future payments.

Higher payment limits for ARC and PLC ($155,000 up from $125,000) will help operations that were close to limitations. Entity parity established in the bill may be one of the largest changes to payment limits in recent past. LLCs and S-corporations will be allowed to have multiple payment limitations based on ownership, which resembles general partnerships historically. C-corporations (not included) will remain within one payment limit. 

There is still guidance that needs to be addressed and issued; we do not want to commit to knee-jerk changes of entity structures, but it is something that needs to be thought through during planning.

The federal estate tax exemption was increased to $15 million ($30 million/couple) and indexed for inflation moving forward. This is a welcome relief compared to the prior $5 million that was floated with prior administrations. This federal exemption will allow most operations to escape federal estate tax consequences, but everyone must be very aware of the Washington state exemption levels that could sting if not planned for. 

Effective July 1, 2025, Washington state increased the estate exemption to $3 million/individual (previously $2.193 million), which will shield smaller estates from paying Washington state estate tax. With this increase in exemption, tax rates increased across the board. The top rate increasing to 35% for taxable estates above $9 million represents the highest estate tax rate in the country and could still impact estates that do not have a federal estate tax problem. The farm exemption for Washington state estate tax remains in place with an enhanced allowance for a “qualified nonfamilial heir” that may apply in very limited circumstances. 

The moral of the story is to continue to be vigilant and address potential estate issues even though there may not appear to be a federal problem with the increased $15 million exemption. 

Other tax provisions such as 100% bonus depreciation and enhanced Section 179 limits are a welcome relief within the ag community. The 20% qualified business income deduction (Section 199A) was made permanent and represents substantial tax savings for qualifying businesses. The SALT deduction cap and “no tax on tips,” which seems to generate a large portion of the media coverage, have very little impact on the majority of Washington state ag producers.

Overtime tax exemptions will likely drive employee questions as we move to the end of year for farm operations that have employees. Overall, employees can deduct up to $12,500 of “qualified overtime pay” from their federal taxable income as long as it is reported correctly on their annual W-2. It appears that farm overtime will not qualify as “qualified overtime pay.” Washington, Oregon, and California have farm overtime requirements at the state level, but qualified overtime pay is determined at the federal level under the Fair Labor Standards Act (FLSA). FLSA does not require overtime pay for agriculture workers, and as a result, the overtime paid to Washington state farm workers will not qualify for the deduction unless special rules are added to the law.

While the bill doesn’t change every operation’s plan moving forward, it opens doors to a large amount of discussion and strategic planning opportunities for ag producers around the country. When the farm economy is struggling, it may seem less necessary to hold advisor meetings and planning sessions. However, proactive planning and decision making are the key to operational success. Looking in the rear-view mirror doesn’t give much of a picture about what lies ahead. I encourage you to sit down with your trusted advisors to review your situation and possible opportunities that may exist.  

Ryan Janke, CPA is a shareholder at Leffel, Otis and Warwick P.S. He works out of the firm’s Davenport, Fairfield, and Tekoa offices. Ryan works primarily with farmers and ag-related businesses. He can be reached at rjanke@low.cpa.