4 Things Farmers Should Know About A Lesser-Known Tax Deduction

Why It Matters

The deduction offers farmers a significant, under‑utilized tax credit that can improve profitability, and pending legislation could cement its availability, making timely action crucial.

Key Takeaways

• Deduction applies only to landowners, not tenant farmers.
• Recent land purchases yield higher residual soil fertility deduction.
• Requires professional soil testing to prove excess fertilizer.
• Must use a tax preparer familiar with the deduction.
• IRS lacks guidance; legislation could formalize the deduction.

Summary

The video spotlights the residual soil fertility deduction, a little‑known tax break that can exceed $1,000 per acre for qualifying farmland, and urges producers to consider it before the April 15 filing deadline.

Host Margy Eckelcamp explains four critical points: the credit belongs solely to landowners, not tenant farmers; newer acquisitions generate larger deductions because older purchase dates (pre‑2010) offer little benefit; documented excess fertilizer must be verified through professional soil tests; and a knowledgeable tax preparer is essential to claim the credit.

She notes that IRS guidance is absent, yet interest in the deduction has doubled annually since 2020, and lawmakers may codify it in upcoming farm‑bill or reconciliation legislation, according to industry sources.

For agribusinesses, leveraging the deduction could offset rising land costs, improve cash flow, and create a competitive edge, while pending legislation adds urgency to secure the benefit under current rules.

Original Description

While not necessarily new, market factors and growing awareness are putting the spotlight on residual soil fertility deductions.

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