January 21, 2025

Tools in the tax code can be complex. But opportunities shouldn’t be ignored, especially in a tight margin environment like today. Working with an ag-focused certified public accountant can help decipher the utility and impact of the Section 180 deduction.
IRS Section 180 is a part of the U.S. tax code that provides specific tax deductions related to soil and water conservation expenditures. These provisions are particularly relevant for farmers and landowners who engage in practices that maintain and improve the quality of this land.
Let’s explore the intricacies and implications of residual fertilizer.
The idea behind it is to allocate a value to any residual fertilizer in farmland that was recently purchased or inherited. The value of the fertilizer is then deducted to offset income.
“We work with your agronomist to determine a value of the preexisting soil fertility on land purchased in the current year and can potentially go back to land purchased in years past,” says Aaron VonFeldt, principal at Adams Brown. “We expect some additional guidance from the IRS later in 2025 that may change how this deduction is taken, and we will advise landowners as new information comes out. This can be a significant deduction for farmers and should be something they consider when making a land purchase.”
Farming practices that contribute to the long-term improvement of soil fertility can affect the residual value. This includes:
adding lime or gypsum to neutralize soil acidity
incorporating organic matter, such as compost or manure, to improve soil structure
applying fertilizers that provide lasting benefits beyond a single growing season
The exact deduction amount depends on various factors, such as soil type, fertilizer application methods, crop rotation and climatic conditions.
You will need to consult with professionals. Adams Brown has relationships with agronomists and others who can walk you through the process. Give us a holler.
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