If you’ve recently purchased or inherited farmland—or plan to—there’s a little-known tax opportunity that you should know about:
U.S. tax law (§180), you may be able to deduct the value of residual soil fertility (leftover nutrients like nitrogen, phosphorus, and potassium) from the purchase price of the land.
This can result in tens ofthousands of dollars in tax savings, but it requires:
• Timely soil testing by an agronomist or crop advisor after purchase or inheritance
• Valuation of excess nutrients compared to local baseline soil levels
• Proper documentation and election on your tax return for the year you acquired the land (or if within 3 years by filing an amended return)
Even if you don’t deduct the full amount in year one, the IRS allows it to be depreciated over 3–4 years.This deduction is available to farmers and landlords engaged in the business of farming.
If you have any questions, please reach out to us.