September 19, 2025

Farmers and agribusiness owners know that investing in their land is critical to long-term productivity. Fertilizer, lime, and other soil-conditioning products are essential to sustaining yields, but they also represent a significant cost. Fortunately, the Internal Revenue Code provides a powerful tool to ease the tax burden of these investments: Section 180.

What is Section 180?

Under the default tax rules, expenditures for fertilizer, lime, and other soil-conditioning materials must be capitalized into the basis of the land. Because land itself is not depreciable, this often means those costs cannot be recovered until the land is sold, sometimes decades later.

Section 180 changes that outcome. It allows farmers and ranchers to elect to deduct these expenditures in the year they are paid or incurred, rather than capitalizing them. In practice, this means qualifying costs can often be written off 100% immediately, improving cash flow and lowering the tax bill in the current year.

What Types of Costs Qualify?

Expenses that may be deducted under Section 180 include:

• Fertilizer and lime applied to farmland,
• Materials used to enrich, neutralize, or condition the soil, and
• Similar substances that directly improve the quality or productivity of farmland.

The election applies only to land used in farming and to expenditures made in the business of farming. It is not available for expenditures related to the initial preparation of land never before used for farming purposes. Importantly, "farming" does not include forestry or the growing of timber, and a person cultivating or operating a farm for recreation rather than profit is not engaged in "the business of" farming.

How the Election Works

The election is made on the tax return for the year the expenses are incurred. It applies to all qualifying expenditures for that year. Once made, the election is binding for that year, though the IRS may allow revocation in limited cases.

Bottom Line

For many agricultural producers, Section 180 provides a straightforward way to:

• Accelerate deductions that would otherwise be locked into land basis,
• Improve cash flow by reducing taxable income in the current year, and
• Simplify accounting by avoiding indefinite tracking of capitalized amounts.

This election can be especially valuable in years when farm income is high, providing a meaningful offset to taxable profits.

If you would like to learn more about how Section 180 could benefit your operation, contact Gilpin Givhan today to discuss your situation.