Illinois Estate Tax Change: What the “Family Farm Preservation Act” Would Actually Do

Updated: January 27, 2026
Estate tax rules are rarely dinner-table conversation. But if you’re an Illinois resident with significant assets and you come from a family that owns farmland, this proposal is worth paying attention to.

Two bills, commonly referred to as the Family Farm Preservation Act (HB2677 in the House and SB1688 in the Senate), would change how Illinois estate tax works for certain estates that include qualified farm property.

One important note up front: the $6 million figure in this proposal isn’t a new across-the-board exemption for every Illinois estate. It applies to estates that qualify under farm-specific rules tied to Internal Revenue Code §2032A (special use valuation).

Current Illinois estate tax landscape

Illinois is one of a number of states that imposes its own estate tax, separate from federal estate tax. Today, a commonly cited planning threshold is $4 million for Illinois estate tax purposes.

Because that state threshold is much lower than the federal exemption, some Illinois estates can face state estate tax even when they’re nowhere near the federal estate tax range.

What’s being proposed (HB2677 / SB1688)

Both HB2677 and SB1688 would amend the Illinois Estate and Generation-Skipping Transfer Tax Act to provide more favorable treatment for estates that contain farm property that qualifies for special use valuation and that make an Illinois election under the bill’s rules.

Here’s what that means in practice.

1) A $6,000,000 exemption, but only for qualifying farm estates

Under the bills, estates that meet the eligibility requirements would use a $6,000,000 exemption (instead of the $4,000,000 exclusion amount referenced in current Illinois law) when calculating the state death tax credit.

2) Inflation adjustment

The bills also provide for the exemption amount to be adjusted annually based on the Consumer Price Index (CPI).

3) Special use valuation for qualified farm property (and Illinois can “ignore” a federal limit)

The bills introduce an Illinois special use valuation concept tied to IRC §2032A, and specify that qualifying farm property would be valued under §2032A without regard to the federal limitation on the reduction in fair market value (for Illinois estate tax purposes).

4) Illinois election can be made even if you don’t elect it federally

Notably, the bills say the Illinois election can be made whether or not the executor makes a special use valuation election on the federal estate tax return.

Why the $6 million amount doesn’t apply to every Illinois estate

The bills are limited to estates that:

• contain property that qualifies for special use valuation under the bill’s rules, and

• make an Illinois election to apply that treatment.

And because the bills lean on IRC §2032A, you don’t get the benefit unless you meet the federal-style eligibility framework–with one key exception regarding family members. Contrary to the stricter federal framework, the proposed legislation expands the definition of a “qualified heir” to explicitly include any lineal descendant of the decedent’s grandparent – such as cousins, aunts, and uncles – as well as their spouses and legally adopted children.

The “50% farmland” concept

IRC §2032A includes percentage tests. In plain English: to qualify, farm/business property generally needs to make up a large enough portion of the estate. The statute includes a “50 percent or more” test (and also a “25 percent or more” test for certain real property).

Because the proposal is tied to special use valuation rules, it won’t apply across the board. It’s designed for farm families whose estates meet specific thresholds and conditions.

The 10-year “clawback”

Special use valuation isn’t a “set it and forget it” benefit.

Under IRC §2032A(c), the tax benefit can be recaptured if certain requirements aren’t met after the owner’s death. In general, if this happens within 10 years after the decedent’s death (and before the qualified heir’s death), an additional estate tax may apply:

• The qualified heir sells or transfers the property in certain ways, or

• The property stops being used for the qualified farm use.

The Illinois bills explicitly recognize that a “taxable transfer” can include events tied to the imposition of an additional tax under §2032A(c) and even reference the qualified real property that was disposed of or stopped being used for the qualified use.

If the land has to be farmed for the long haul to keep the tax benefit, that’s consistent with how §2032A works.

Has the Family Farm Preservation Act passed?

As of the most recent Illinois General Assembly status pages available:

• HB2677 shows a last action of March 21, 2025 (re-referred to Rules Committee).

• SB1688 shows it was referred to Assignments on February 5, 2025.

Legislation can move, stall, get amended, or get reintroduced, so treat this as proposed unless and until Illinois enacts a final law.

What Illinois residents should do now

If you’re close to the Illinois estate tax threshold and your estate includes farmland:

• Review your current plan and how Illinois estate tax could apply under today’s rules.

• If you own farmland (or expect to inherit it), consider talking with a qualified professional about how §2032A special use valuation works and what long-term requirements might apply.

• Keep an eye on the bills for amendments. Farm-focused legislation often evolves in the details.

If you want a simple rule of thumb: if farmland makes up a substantial portion of your estate and the goal is to keep it in the family, this proposal is relevant. If not, it may not change your Illinois estate tax situation at all.

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