Digest highlights
- Federal estate tax and gift tax limits raised for 2023
- GDT index inches higher
- Fuel prices could dip in 2023
- Ag producer sentiment mixed
Federal estate tax and gift tax limits raised for 2023
In October, the IRS announced the revised federal estate tax and gift tax limits for 2023, according to Paul Goeringer, extension legal specialist at the University of Maryland. The federal estate tax limit rises from $12.06 million in 2022 to $12.92 million in 2023. The federal gift tax limit jumps from $16,000 in 2022 to $17,000 in 2023.
A deceased person owes federal estate taxes on a taxable estate. The taxable estate is the gross estate minus allowable expenses and deductions.
For example, a married farming couple with a taxable estate of $26 million both pass away in 2023. The couple’s heirs may be exempt up to $25.84 million from federal estate taxes and only owe federal estate taxes on $160,000. Since the federal estate tax rate is 40%, in this case, the heirs would owe $64,000 in federal estate taxes.
Goeringer offers another note on federal estate taxes: A surviving spouse has an unlimited marital deduction. The surviving spouse can include the predeceasing spouse’s unused federal estate tax limit in their federal estate tax limit. This concept is known as portability. The surviving spouse can lose portability upon remarrying. Note that several states allow for portability with state estate tax exemptions. Working with a tax adviser to preserve any unused federal or state estate tax exemptions is essential.
Federal tax law allows each taxpayer to gift up to $17,000 per year to one individual without incurring federal gift taxes. This exemption is tied to inflation and increases to the nearest $1,000 amount.
It is worth keeping in mind that a few states also impose estate taxes, and a few only have inheritance taxes, Goeringer said. These tax exemptions vary among the states and, in many cases, are less than the federal exemption.
Farm families concerned about hitting top federal or state estate tax exemptions need to begin working on farm succession and estate plans to limit potential tax liability down the road. When developing an estate plan, state estate taxes, inheritance taxes or both should be considered by working with a qualified tax adviser who can assist you in creating a plan to limit tax liability at death.
GDT index inches higher
The latest Global Dairy Trade (GDT) auction, held Dec. 6, saw the overall price index post a second consecutive increase. Albeit small, the index was up 0.6%, with price movement in individual product categories mostly higher in a narrow range:
- Skim milk powder was up 1.7% to $3,102 per metric ton (MT, or about 2,205 pounds).
- Whole milk powder was up 0.1% to $3,400 per MT.
- Anhydrous milkfat was up 1.8% to $5,797 per MT.
- Butter was down 1.9% to $4,725 per MT.
- Cheddar cheese was up 1.8% to $4,826 per MT.
The GDT platform offers dairy products from six global companies: Fonterra (New Zealand), Dairy America (U.S.), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction is Dec. 20.
Fuel prices could dip in 2023
The U.S. Energy Information Administration (EIA) forecasts global oil inventories to fall by 0.2 million barrels per day in the first half of 2023 before rising by almost 0.7 million barrels per day in the second half of the year. The inventory forecast would result in a Brent crude oil price forecast averaging $92 per barrel in 2023, $9 less than average of $101.48 per barrel in 2022.
The U.S. average price for gasoline was $3.39 per gallon on Dec. 5, down 14 cents from the week before but a nickel higher than the corresponding date a year earlier, according to the EIA. U.S. average retail gasoline prices are forecast to average $3.51 per gallon in 2023, down from $3.99 per gallon 2022.
The average U.S. on-highway price of diesel was $4.97 per gallon as of Dec. 5, 17 cents per gallon below the week before but $1.29 more than early December 2021. The U.S. average on-highway prices of diesel are forecast to average $$4.48 per gallon in 2023, down from $5.05 per gallon 2022.
Ag producer sentiment mixed
Economic outlooks among U.S. farmers were mixed in November, according to results of the monthly Purdue University/CME Group Ag Economy Barometer survey. Citing higher interest rates and input costs, survey respondents had a slightly weaker outlook for the near term but were more optimistic in the long term.
The Ag Economy Barometer provides a monthly snapshot of farmer sentiment regarding the state of the agricultural economy. The survey collects responses from 400 producers whose annual market value of production is equal to or exceeds $500,000. Minimum targets by enterprise are as follows: 53% corn/soybeans, 14% wheat, 3% cotton, 19% beef cattle, 5% dairy and 6% hogs. Latest survey results, released Dec. 6, reflect ag producer outlooks as of Nov. 14-18.
Weighted toward corn and soybean producers, more than two-thirds of producers said they expected financial performance in 2022 to match or exceed that of 2021. Concerns about high input costs continued to weigh on producers’ minds, with 42% of respondents citing that as their top concern in the year ahead. Just over one-fifth (21%) of respondents chose rising interest rates as a top concern, with input availability and declining commodity prices chosen as a top concern by 14% of respondents.
“It’s become increasingly clear that the index is capturing the perception among producers that this is not a good time to make large investments because prices for farm machinery and construction are high,” said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. Survey results indicated farmers were less bullish about future farmland values than a year ago.
When queried regarding the changes they’ve implemented due to rising energy costs, responses were quite varied. About one-third of respondents planned to reduce tillage, followed by reduced nitrogen rates and/or changed application timing.
