home home Find taxes & rates home Other taxes home Estate tax deduction for farms Estate tax deduction for farms
The following Q&A provides some general answers and examples about the farm deduction. Please see RCW 83.100.046 for details.

Are farms subject to the estate tax?

No. The value of farms and timberlands are deducted from the taxable value of an estate as long as certain requirements are met. This deduction applies to the land, farm structures and farming equipment.

Are there any limits to how much value can be deducted?

No. It is an unlimited deduction.

What requirements must be met?

  • The land must have been farmed by the decedent or a member of the decedent's family at the time of the decedent's death.
  • The decedent must have been a citizen or resident of the United States .
  • The farm must comprise at least 50 percent of the total estate's adjusted value.
  • The farm must pass from the decedent to a qualified heir.
  • At least 25 percent of the value of the estate must consist of farm land that was actively managed for at least five or the last eight years.

What happens if the farmland and equipment comprises less than 50 percent of the total value of the estate?

The value of the farm and equipment becomes taxable, but the estate still benefits from the general deduction of $1.5 million for deaths in 2005 and $2 million for deaths in 2006 and beyond.

What is the definition of a farm?

The definition of farm includes stock, dairy, poultry, fruit, furbearing animals, and truck farms; plantation; ranches; nurseries; ranges; greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities; and orchards and woodlands.

Do woodlands or timber operations qualify for the farm deduction?

Yes, if the estate otherwise qualifies for the deduction. Timber operations is defined as the planting, cultivating, caring for, or cutting of trees; or the preparation, other than milling, of trees for market.

How is "member of the decedent's family" defined?

"Member of the decedent's family" means:

  • An ancestor of an individual; or
  • Spouse of an individual; or
  • A lineal descendant of the individual, of the individual's spouse, or a parent of the individual; or
  • The spouse of any lineal descendant; or
  • A legally adopted child of an individual.

Would my estate qualify for the deduction if I am a tenant farmer?

Yes. The taxable value of the estate of a qualifying tenant farmer can be reduced by the value of agricultural personal property (equipment).

Would a farm qualify if it is in a partnership, corporation or trust?

Yes, if the estate otherwise qualifies for the deduction.

Must the heir continue farming the inherited property?

No. Farming can be discontinued or the property sold without affecting the deductibility of the farm.

Do you have examples of how the deduction works?

1. The decedent died May 18, 2005 , with an adjusted gross estate valued at $4 million. The decedent was a dry land wheat farmer and owned land and equipment valued at $2.5 million. The farm value is more than half the total value of the estate.

Taxable estate

$4,000,000

Less $2,500,000 farm deduction

- $2,500,000

Less $1,500,000 statutory exemption (for 2005 deaths)

- $1,500,000

 

Washington taxable estate

$0

 

2. The decedent died August 28, 2005 , with an adjusted gross estate valued at $5 million. The value of his farm is $2.3 million. The estate cannot deduct the value of the farm because it is less than half the total value of the estate.

Taxable estate

$5,000,000

Less $1,500,000 statutory exemption (for 2005 deaths)

- $1,500,000

 

Washington taxable estate

$3,500,000

 

The estate owes $470,000 in Washington estate tax. While the decedent did not qualify for the farm deduction, the estate may be able to pay the tax over 15 years.

 

3. The decedent died May 23, 2006 , with an adjusted gross estate valued at $1.6 million. The decedent was a tenant hay farmer who owned $800,000 in farm equipment. The value of the equipment is half of the total estate so it can be deducted.

Taxable estate

$1,600,000

Less $800,000 farm deduction

- $800,000

Less $2,000,000 statutory exemption (for 2006 deaths)

- $2,000,000

 

Washington taxable estate

$0

 

4. The decedent died January 1, 2006 , with an adjusted gross estate valued at $6 million. The decedent owned farm land and equipment valued at $3 million. The value of the farm and farm equipment is 50 percent of the adjusted gross estate, so it can be deducted.

Taxable estate

$6,000,000

Less $3,000,000 farm deduction

- $3,000,000

Less $2,000,000 statutory exemption (for 2006 deaths)

- $2,000,000

 

Washington taxable estate

$1,000,000

 

Based on the tax rate of 10%, the estate owes $100,000 ($1,000,000 x 10%) in Washington estate tax.

More information