Revisiting Section 180

Section 180 of the IRS tax code allows landowners to deduct the value of residual soil fertility as a depreciable asset after purchasing farmland. While the rule itself is not new, it has gained attention in recent years as more landowners explore tax strategies that reflect the true value of their fields.

The deduction only applies to new purchasers of farmland, not renters or existing landowners. The key is measuring and documenting residual fertility, such as phosphorus, potassium, and lime, soon after the land is purchased. A timely baseline creates the opportunity to depreciate that fertility value over several years, offering a potential tax benefit.

E4’s long history of soil testing and nutrient management positions it as one of the most trusted sources for accurate nutrient reduction data. Historical comparisons and data analytics are mined from rich geographical historical data sets for over 25 years.

We have worked on Section 180 preparation for many CPAs, accountant firms, and tax attorneys throughout the country, since 2014.

This approach can be especially helpful on recently farmed acres with strong nutrient levels at the time of sale. It is not automatic, though, and the process requires a clear plan.

What About Carbon Credits?

Because both topics relate to soil value, Section 180 and carbon credits are sometimes mistakenly grouped together. In reality, they are two separate tools with very different applications.

Section 180 focuses on what is already present in the soil at the time of a land purchase. Carbon credit programs, on the other hand, are built around future practices that improve soil carbon storage, such as no-till systems or cover cropping.

Both relate to soil health and long-term planning, but they serve different purposes. One is a tax deduction. The other is a potential revenue stream. Confusing the two can lead to incorrect assumptions or missed opportunities.

Common Misunderstandings

Because Section 180 is rarely discussed, there are still many landowners, and even some tax professionals, who are unsure how it works.

• Depreciation deductions can only be used on land that is used for agricultural use, like crops, pasture, rangeland, etc.
• It is not a tax credit. It is a depreciation deduction spread over multiple years.
• It requires a documented baseline fertility analysis linked to the land purchase.
• It does not apply to rented land or land already owned.
• The deduction reflects current nutrient levels, not fertilizer applied after purchase.

The process typically involves coordination between a qualified agronomist, a certified appraiser, and your tax professional.

A Professional Perspective

“Section 180 can be a useful tool for certain landowners, but the key is timing and documentation,” says Matt Mullenix, E4 accountant with Rush CPA & Associates in Atlantic, IA. “Every situation is different, so it’s important to involve your accountant early in the land purchase process to determine if this deduction is appropriate.”

Looking Ahead

While Section 180 has been in place for decades, it is gaining renewed relevance. It represents a bridge between agronomic value and tax planning, one that more landowners are beginning to explore.

Although it is separate from carbon programs, both reflect a larger shift in how we view the value of soil. As this area continues to evolve, E4 Crop Intelligence will remain committed to helping landowners understand and apply tools that connect soil management with long-term strategy. The E4 team works closely with agronomists, accountants, and appraisers to ensure that landowners have timely, accurate information that supports confident decision-making.

For a deeper look at how Section 180 works and who may qualify, read our previous article on the topic.