Congress passed the American Taxpayer Relief Act of 2012 (ATRA) on Jan. 1, 2013 and with President Obama's signature the following day, ATRA ushered in broad new tax laws for 2013 onward. While ATRA's tax changes are extensive and many of these changes will affect farmers, this article will point out the changes that may have the most impact on the farmer's income tax bill.
Tax Bracket Changes
One major change ATRA brings for 2013 and subsequent years is a new top tax bracket. The new bracket applies to income above $400,000 (for farmers filing as single) or $450,000 (for married farmers filing jointly). The new tax rate on income in the new top bracket is 39.6%.
Farmers with incomes below the $400,000 or $450,000 thresholds are not affected by this change, since ATRA did not make any changes to the lower tax brackets.
Note: Farmers will be filing their 2012 tax return based on the 2012 tax brackets. The new ATRA brackets and rates, including the new top bracket, are effective starting with the 2013 tax year. The new ATRA brackets and tax rates will therefore affect farmers' returns that are filed in early 2014 in connection with the 2013 tax year.
While the new top tax bracket is a major ATRA change, there are some other additional ATRA changes that will affect the farmer's tax liability each year from 2013 onward.