Estate taxes play a crucial role in Illinois soybean farmers’ financial planning. As the spring legislative session in Springfield enters its final weeks, key provisions of the Tax Cuts and Jobs Act (TCJA) are approaching their expiration at the end of 2025. This article explores how federal and Illinois state estate tax laws affect soybean farmers and what the expiration of TCJA provisions means for the future of family-owned farms.

Illinois State Estate Tax

In addition to federal estate taxes, Illinois imposes its own estate tax with an exemption threshold of $4 million, substantially lower than the current federal exemption. Unlike the federal estate tax, which applies only to the portion exceeding the exemption, the Illinois tax applies to the entire estate value once it surpasses $4 million. As a result, even smaller farms that might not be subject to federal estate tax could still face substantial state-level estate taxes. Illinois soybean farmers often have landholdings and assets exceeding this exemption, making them particularly vulnerable. The state’s estate tax structure includes 20 different tax brackets ranging from 0.8% to 16%. When combined with federal estate taxes, the financial burden on heirs can be significant, further complicating succession planning.

Federal Estate Tax and the TCJA Expiration

Illinois farmers must pay not only the federal estate tax but also the Illinois estate tax with an exemption stands at approximately $13.99 million per individual ($27.98 million for married couples). However, unless Congress extends this provision, the exemption will revert to pre-TCJA levels in 2026, estimated to be around $7 million per individual, adjusted for inflation. For Illinois soybean farmers, this reduction could lead to substantial tax liabilities. Farmland values in Illinois are among the highest in the Midwest, with prime cropland averaging over $10,000 per acre. Many farm estates, including land, equipment and other assets, could easily surpass the reduced exemption threshold, making them subject to federal estate tax rates of up to 40% on the excess value.

Challenges for Farm Succession and Family-Owned Farms

The combination of a lower federal exemption and the already-stringent Illinois estate tax presents several challenges for Illinois soybean farmers. More farm estates will become taxable at both the federal and state levels, increasing financial liabilities for heirs. Families might be forced to sell farmland to cover estate taxes, disrupting multigenerational farm operations. More farm families will need to invest in estate planning services, including legal and financial advisory fees, to navigate the complex tax landscape. Smaller family farms could struggle to absorb the financial impact, leading to consolidation and increased ownership by larger corporate entities.

What ISG is Doing

Addressing Illinois estate tax law has been a top priority for Illinois Soybean Growers (ISG). Over the past few years, ISG has worked diligently to build relationships with legislators, both in D.C. and Springfield, to push for estate tax reforms that lessen the financial burden on soybean producers and facilitate generational farm transfers. ISG has collaborated with state agencies and the General Assembly to introduce legislation aimed at reducing tax liabilities for family farms and simplifying the estate tax process.

One key reform ISG has championed is restructuring the Illinois estate tax to ensure the $4 million exemption is a true exemption, meaning estates would only be taxed on the value exceeding $4 million rather than the entire estate value once the threshold is crossed. Additionally, ISG has advocated for reducing the current 20 tax brackets to just four, implementing a progressive-flat tax structure to simplify estate planning and tax compliance. The proposed new tax brackets are:

• 5% for estates between $4 million and $10 million
• 10% for estates between $10 million and $20 million
• 16% for estates between $20 million and $25 million
• 22% for estates over $25 million

This structure would lessen tax liabilities on the lower end while increasing tax rates for the highest-value estates. Importantly, this legislation impacts all estates, not just agricultural ones. Additionally, ISG has focused on simplifying the estate tax process, as current complexities and the loss of attorneys specializing in estate tax law have made it increasingly difficult for farmers to maximize their estate planning and effectively pass down their farms.

Legislative Outlook

One of the major challenges facing the Illinois General Assembly is the state’s significant budget crisis, with a projected $1.7 billion deficit for fiscal year 2026. The Committee on Government Forecasting and Accountability has forecasted an even larger shortfall. With legislators emphasizing the need to balance the budget, any new legislation must be revenue-neutral to have a realistic chance of passing. Understanding these fiscal constraints, ISG has worked to craft an estate tax bill that does not add to the budget deficit while still providing relief to farm families. With the spring legislative session scheduled to wrap up by May 31, ISG remains hopeful that these reforms can be included in legislative negotiations, ensuring that family farms are better preserved for future generations.

At the federal level, the House is aiming to pass a reconciliation bill that includes extensions of the TCJA provisions, including estate tax relief, stepped-up basis and other generational tax benefits. ISG has been actively engaging with members of the Illinois delegation, particularly those on the House Ways and Means Committee, to voice strong support for renewing the current estate tax laws. However, the outcome remains uncertain, as some estimates suggest that extending all TCJA provisions could add over $4 trillion to the national debt over the next decade. Fiscal conservatives in Congress are likely to demand further debate before any action is taken. On the Senate side, Majority Leader John Thune (R-SD) has indicated that tax issues might be deferred until later in the year, adding another layer of uncertainty to the process.

Conclusion

The impending expiration of TCJA estate tax provisions and Illinois’ restrictive estate tax laws pose significant challenges for soybean farmers seeking to preserve their family legacies. Without legislative action, higher tax burdens could force land sales, disrupt generational farm transfers and increase financial strain on Illinois farm families. ISG remains committed to advocating for tax reforms that protect farm estates, reduce financial burdens and ensure a smoother transition for the next generation of soybean farmers. By working with legislators at both the state and federal levels, ISG aims to create a more favorable estate tax structure that allows family farms to thrive for years to come. As the legislative process unfolds, ISG will continue to play a key role in shaping policies that support Illinois agriculture and preserve the livelihoods of farm families across the state.