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The following information provides a general explanation of the farm deduction. Please see RCW 83.100.046 for more details.

The value of farms and timberlands may be 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. It is an unlimited deduction. A tenant farmer may qualify for the farm deduction if the requirements are met. Farm property in a closely-held partnership, corporation, or trust can qualify for the deduction as long as all requirements are met.

An heir to the farm does not have to continue farming in order for the estate to take the deduction. The heir may discontinue using or sell the farming property after inheriting it.

Property used for farming

Property used for farming is any tangible personal property or real property used for a farming purpose. Examples of “farm property” include, but are not limited to, such items as stock, dairy, or furbearing animals, ranches, farmland, nurseries, greenhouses and other similar structures, orchards, woodlands, timber plantings, and/or the machinery and equipment used for a farming purpose.

Farming purpose

Farming purpose means:

  • Cultivating the soil.
  • Raising or harvesting any agricultural or horticultural commodity, including raising, shearing, feeding, caring for, training, and management of animals on a farm.
  • Handling, drying, packing, grading, or storing on a farm any agricultural or horticultural commodity in its unmanufactured state, but only if the owner, tenant, or operator of the farm regularly produces more than one-half of such commodity.
  • Planting, cultivating, caring for, or cutting of trees or the preparation, other than milling, of trees for market.

Requirements to meet in order to take the farm deduction

The general requirements that must be met by all types of farm property in order to qualify for the farm deduction are:

  • At the time of death the decedent must have been a citizen or resident of the United States,
  • The farm property must pass to or be acquired by a qualified heir from the decedent,
  • The farm property must have been used for a qualifying use (farm property used for a farming purpose) at the time of the decedent's death,
  • The farm property must have been used by the decedent or a member of the decedent's family at the time of the decedent's death, and
  • The farm property must consist of at least 50 percent or more of the total estate's adjusted gross value (total gross estate less any mortgages or indebtedness on such farm property).

In order for real property to qualify for the farm deduction additional requirements must be met. Real property can include, but is not limited to, such items as land, barn, or ranch house. The special requirements for all types of real property are:

  • During the eight-year period ending on the date of the decedent’s death there have been periods aggregating five years or more during which:
    • The real property was owned by the decedent or a member of the decedent’s family,
    • The real property was used for a qualified use by the decedent or a member of the decedent’s family, and
    • There was material participation by the decedent or a member of the decedent’s family.

Certain real property has an additional special requirement to qualify for the farm deduction. These qualified real property types can include, but are not limited to, such items as land or barns, but do not include ranch houses. The special requirements for these specific types of real property are:

  • The specific real property must make up twenty-five percent or more of the adjusted gross value of the estate and during the eight-year period ending on the date of the decedent’s death there have been periods aggregating five years or more during which:
    • The real property was owned by the decedent or a member of the decedent’s family,
    • The real property was used for a qualified use by the decedent or a member of the decedent’s family, and
    • There was material participation by the decedent or a member of the decedent’s family.

If the above requirements are not met in respect to farm property, the property does not qualify for the farm deduction.

Member of the decedent's family definition

A "member of the decedent's family" means:

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

Estate tax returns filed after January 1, 2014

With the development of the revised estate tax form several addendums were created to aid estates in reporting. One of the addendums is for the farm deduction. When completing an estate tax return for a date of death on or after January 1, 2014 and if eligible to take the farm deduction, complete the Washington State Estate Tax Addendum # 2 – Property Used for Farming form.

Note: For dates of death prior to January 1, 2014, the farm deduction addendum is recommended to be completed and filed with the previous version of the estate tax return. Please be aware that the line numbers will not match up. If the estate is eligible for the farm deduction, enter the calculated deduction on Line 4b of the estate tax return for dates of death of May 17, 2005 through December 31, 2013.