Why Does Soil Health & Equity Matter?

When farmers buy new land, they can use grid sampling to measure the soil’s leftover nutrients, also known as residual soil fertility. E4 Crop Intelligence is here to help farmers take advantage of tax deductions based on this fertility. E4 has over 25 years of experience and a rich history of soil testing values from a large geographical area throughout the USA. It’s that rich history of soil testing data that can provide a more accurate data analysis. The IRS allows farmers to claim these leftover nutrients as a depreciable asset, which means they can spread the cost of using the soil’s nutrients over a set number of years on their taxes. Proving residual soil fertility requires proper soil testing and documentation. E4’s expert team can help farmers gather this data and ensure they maximize their tax benefits.

The value of soil testing is more apparent now than ever. More than just testing nutrients, soil equity testing serves to assess pathogens, carbon availability, and biological factors. Through tried and proven results, generational farms can be rewarded for their attention to detail.

Accounting

Sitting down with an accountant when claiming tax deductions for residual soil fertility is essential because the process is complex and involves navigating IRS regulations. Here’s why an accountant is helpful:

One of the biggest challenges is understanding how to allocate the cost of residual soil fertility over time. This involves following specific amortization rules, and an accountant can ensure you’re applying the correct method and spreading the cost over the right number of years on your taxes.

Beyond that, the IRS has clear guidelines, such as Internal Revenue Code §180, which allow farmers to deduct certain expenses related to soil health, like fertilizer and lime. Navigating these guidelines can be complex, but an accountant ensures that you’re compliant with IRS rules, reducing the risk of costly errors or audits. Moreover, an accountant will help you identify other depreciable assets on your farmland, such as fencing, grain storage, and drainage systems, further maximizing your deductions and boosting your overall tax savings.

Proper documentation is also critical. The IRS requires proof of residual soil fertility and related expenses, and an accountant will guide you in keeping accurate records, from soil test results to contract details, so that you’re fully prepared in case of an audit. Additionally, tax rules can differ between federal and state levels, and some states may not follow the same IRS guidelines. An accountant helps you navigate these differences, ensuring you make the right deductions at both levels.

In short, an accountant’s help ensures you’re following the law while maximizing your potential tax savings, providing peace of mind, and avoiding costly mistakes.

Take control of your farm’s future with expert insights from E4 Crop Intelligence! Our team can help you maximize your tax deductions through precise soil sampling and fertility management. Don’t leave money on the table—contact us today to start improving your soil health and boosting your bottom line!

Check out this scholarly article from the Illinois Tax School on deducting residual soil fertility.