When you buy or inherit farmland, you could be gaining valuable nutrients already in the soil. The residual fertility deduction represents a specialized tax planning opportunity for both farmers and landowners. With the right approach, they can translate into meaningful economic benefits.
What is residual fertility, and why does it matter?
Residual fertility refers to plant‑available nutrients that remain in the soil at the time you acquire land. Because these nutrients are used up over future crop years, the IRS treats them more like a consumable asset than a permanent improvement to land. In practical terms, properly documented residual fertility can be deducted or depreciated, reducing taxable income while preserving your agronomic plans.
Applicable Tax Code Sections
Residual fertility deductions and depreciation are generally considered under three key sections of the Internal Revenue Code:
- Section 180 – Allows for the current deduction of certain soil and water conservation expenses, including fertilizer, by taxpayers engaged in farming.
- Section 167 – Provides for depreciation deductions on property used in a trade or business or held for the production of income.
- Section 168 – Establishes the rules for depreciating assets that last beyond one year, typically under Modified Accelerated Cost Recovery System (MACRS).
Documentation and Support Requirements
The IRS expects residual fertility deductions to be well-supported. The collaboration of Christianson and Anez Consulting pairs tax precision with agronomic rigor so you can move forward with confidence
Together, we provide:
- Precision soil sampling near the acquisition date and certified lab analysis.
- Quantification of nutrients above agronomic baselines, providing a clear, defensible profile of residual fertility.
- Independent, verifiable valuation to support allocating purchase price (or inherited basis/1031 exchange basis) to residual fertility.
- Correct elections and reporting on your return.
Why work with Christianson + Anez
Christianson PLLP was founded in Willmar Minnesota in 1987 and has grown alongside the farm communities we serve. We understand the cyclical nature of agriculture, commodity markets, and the pressures faced by growers. Our insights are informed by this practical understanding, allowing us to provide relevant and strategic advice. We pair practical, on the ground understanding with rigorous tax, accounting, and attestation expertise. With decades of hands-on experience in agribusiness and a deep-rooted commitment to excellence, our team is ready to help your business thrive.
Anez Consulting is a family-owned and operated engineering and consulting firm located in Willmar, Minnesota. Founded in 1997 by Jared and Kami Anez, the company has grown to serve clients across over 25 counties in Minnesota and surrounding states. With a combined 75+ years of experience, Anez understands the challenges facing modern agriculture. Our comprehensive suite of agricultural consulting services is designed to help crop and livestock farmers and related agribusinesses navigate regulations, increase efficiency, boost profitability, and achieve long-term sustainability. Getting started is straightforward
Let’s Get Started
Ready to uncover what’s already working for you beneath the surface? Work with a farm-focused team that understands the business, family, and tax decisions behind your operation. Call Christianson at 888‑852‑5937 or fill out the form below.
