HERITAGE Act Boosts Farmland Estate Tax Exclusion to $15 Million for Active Farms

The HERITAGE Act aims to make it significantly easier—and cheaper—to pass down large, actively farmed properties to the next generation. This bill focuses squarely on estate taxes, specifically by changing the rules around how much you can reduce the value of farmland when calculating what the heirs owe the IRS.

The $15 Million Question: What’s Changing?

Right now, when a family inherits qualified farmland, they can reduce the “fair market value” of that land for estate tax purposes by up to $750,000 using a specific tax code provision (Section 2032A). This bill jacks that number up dramatically, but only for certain types of farmland. Specifically, for property used for active farming (referred to in the bill as qualified use under subparagraph (A) of subsection (b)(2)), the maximum reduction limit explodes from $750,000 to a massive $15,000,000.

Think of it this way: if a farm is valued at $20 million, the heirs could potentially knock $15 million off that valuation for tax purposes, drastically lowering the estate tax bill. This change applies only to the estates of individuals who pass away after the bill becomes law. The bill also makes necessary technical adjustments to other parts of the tax code to ensure this new $15 million figure is consistently applied.

Who Gets the Big Break?

This is a highly targeted benefit. If you own a large, actively managed farm that falls under the IRS’s definition of “qualified use” in subparagraph (A), your heirs could see a huge tax advantage. This is designed to help those family farms where the land value has skyrocketed, but the actual cash flow might not be enough for the next generation to pay a massive estate tax bill without having to sell off the farm itself.

However, the bill draws a sharp line. For farmland that falls under the other type of qualified use (subparagraph (B) of subsection (b)(2)—which often covers less actively managed or rented properties), the reduction limit stays exactly where it is: $750,000. So, if you’re a landowner whose property falls into that second category, this bill does absolutely nothing for your estate planning.

The Real-World Impact and the Fine Print

For a large farming family, this change is huge. It’s the difference between being forced to liquidate assets or take out massive loans to cover the tax bill, and being able to smoothly transition the operation to the kids. It’s a clear win for generational transfer in high-value agricultural areas.

But there’s a fiscal side to this. When the government grants a $15 million exclusion, that’s $15 million in potential tax revenue that isn't collected. This means the costs associated with running the government are indirectly shifted to the general taxpayer. Furthermore, because the benefit is so large and so specific, it raises questions about equity: why such a massive tax break for this one group of assets, while other estates and small landowners see no change? The key here is that the benefit is highly concentrated among owners of large, specific types of active farmland, while the rest of the taxpaying public bears the fiscal cost of the revenue reduction.