Request My Look-Back

Request My Look-Back

Section 180 and soil fertility: what the Code allows, and what is unsettled

Short answer: Section 180 is a real Internal Revenue Code rule about fertilizer, lime and similar materials that a taxpayer engaged in the business of farming buys, for land used in farming. Whether it may apply depends on your facts, including those two conditions. Fertility that came with land you purchased is a separate, unsettled question, discussed later on this page. This is general information, not tax advice.

1. What Section 180 allows

A taxpayer engaged in the business of farming may elect under Internal Revenue Code §180 to deduct, in the year paid or incurred, amounts spent for fertilizer, lime, ground limestone, marl, or other materials that enrich, neutralize, or condition land used in farming, and the cost of applying them. The election applies only to that year, and generally cannot be revoked without IRS consent. It applies to the farmer’s own purchases of those materials for land already used in farming, not automatically to fertility that came with the land.

A person who farms for recreation or pleasure rather than for profit is not engaged in the business of farming. A cash-rent landlord is engaged in the business of farming only if they participate to a material extent in the operation or management of the farm.

In the Code itself, 26 U.S.C. §180(a) says: “A taxpayer engaged in the business of farming may elect to treat as expenses which are not chargeable to capital account expenditures (otherwise chargeable to capital account) which are paid or incurred by him during the taxable year for the purchase or acquisition of fertilizer, lime, ground limestone, marl, or other materials to enrich, neutralize, or condition land used in farming, or for the application of such materials to such land.” It then says: “The expenditures so treated shall be allowed as a deduction.”

Section 180(b) defines land used in farming as land used, before or simultaneously with those expenditures, by the taxpayer or the taxpayer’s tenant for the production of crops, fruits or other agricultural products, or for the sustenance of livestock. Section 180(c) says the election for a taxable year is made within the time prescribed by law, including extensions, for filing the return for that year: “The election under subsection (a) for any taxable year shall be made within the time prescribed by law (including extensions thereof) for filing the return for such taxable year.” It also says: “Such election may not be revoked except with the consent of the Secretary.”

The regulations fill in a few points. Treas. Reg. §1.180-1(a) says: “A taxpayer engaged in the business of farming may elect, for any taxable year beginning after December 31, 1959, to treat as deductible expenses those expenditures otherwise chargeable to capital account” which are paid or incurred in that year for those materials, and for applying them. It also says: “No election is required to be made for those expenditures which are not capital in nature.” The same regulation says these rules are “not applicable to those expenses which are deductible under section 162 and the regulations thereunder or which are subject to the method described in section 175 and the regulations thereunder.” Treas. Reg. §1.180-2(a) says: “The claiming of a deduction on the taxpayer’s return for an amount to which section 180 applies for amounts (otherwise chargeable to capital account) expended for fertilizer, lime, etc., shall constitute an election under section 180.” And: “Such election shall be effective only for the taxable year for which the deduction is claimed.”

This section is about fertilizer, lime and similar materials the farming business buys. It is not a residual-fertility election.

What to check:
– Whether a deduction on a return was for fertilizer, lime or similar materials the farming business itself bought and applied, on land used in farming.
– Whether the election was claimed on a timely return for that year, including a return filed under an extension.

2. Who qualifies, and which land counts

Two conditions have to be met. The taxpayer must be engaged in the business of farming. The land must be used in farming, by the taxpayer or a tenant, before or at the same time as the expenditure. Treas. Reg. §1.180-1(b) says: “The principles stated in §§ 1.175-3 and 1.175-4 are equally applicable under this section in determining whether the taxpayer is engaged in the business of farming and whether the land is used in farming.”

On the business of farming, Treas. Reg. §1.175-3 says: “A taxpayer is engaged in the business of farming if he cultivates, operates, or manages a farm for gain or profit, either as owner or tenant.” It also says: “a taxpayer who receives a rental (either in cash or in kind) which is based upon farm production is engaged in the business of farming.” And: “a taxpayer who receives a fixed rental (without reference to production) is engaged in the business of farming only if he participates to a material extent in the operation or management of the farm.” Further: “A taxpayer engaged in forestry or the growing of timber is not thereby engaged in the business of farming.” And: “A person cultivating or operating a farm for recreation or pleasure rather than a profit is not engaged in the business of farming.” In the same regulation, “the term farm is used in its ordinary, accepted sense and includes stock, dairy, poultry, fish, fruit, and truck farms, and also plantations, ranches, ranges, and orchards.” A member of a partnership engaged in the business of farming is also engaged in the business of farming, under that regulation. DeepYield does not decide whether those tests are met for you. For how the IRS looks at a ranch that may be a hobby rather than a business, see Hobby or Business? How the IRS Looks at a Ranch.

On land used in farming, section 180(b) is the starting point, and the Section 180 regulations apply the principles of Treas. Reg. §1.175-4. That regulation says: “Land used for the sustenance of livestock includes land used for grazing such livestock.” It also has a continuation-of-use rule, written for soil and water conservation expenditures, that those principles bring in: “If the expenditures are made by the taxpayer in respect of land newly acquired from one who immediately prior to the acquisition was using it in farming, the taxpayer will be considered to be using the land in farming at the time that such expenditures are made, if the use which is made by the taxpayer of the land from the time of its acquisition by him is substantially a continuation of its use in farming, whether for the same farming use as that of the taxpayer’s predecessor or for one of the other uses specified in paragraph (a)(1) of this section.” The examples in that regulation state results under section 175, so this page does not retell them as Section 180 results.

Treas. Reg. §1.180-1(b) is direct about land that has never been farmed: “Expenditures for the initial preparation of land never previously used for farming purposes by the taxpayer or his tenant (although chargeable to capital account) are not subject to the election.”

Special fact patterns, such as a fixed cash rent, timber grown along with farming, or land being farmed for the first time, need a closer look with a tax professional. This page states the general rules. It does not settle those patterns.

What to check:
– Whether the returns and the facts show a farm operated for gain or profit, and by whom.
– For a landlord, whether the rent was based on production, or was a fixed rental, and what participation in the operation or management actually looked like.
– Whether the land was used in farming by the taxpayer or a tenant before or at the same time as the expenditure, and whether the expenditure was for initial preparation of land never previously farmed.

3. Fertilizer and lime in Publication 225

IRS Publication 225 (2025), Farmer’s Tax Guide, Chapter 4, discusses fertilizer and lime. Publications are not legal authority. They summarize the IRS’s view of the law. The 2025 edition is the current one (“For use in preparing 2025 Returns”).

Publication 225 says: “You can deduct in the year paid or incurred the cost of fertilizer, lime, and other materials applied to farmland to enrich, neutralize, or condition it if the benefits last a year or less.” It also says: “You can also deduct the cost of applying these materials in the year you pay or incur it.” The same paragraph points to a prepaid farm-supplies rule that may limit the deduction for these materials.

It then says: “If the benefits of the fertilizer, lime, or other materials last substantially more than 1 year, you generally capitalize their cost and deduct a part each year the benefits last.” “However, you can choose to deduct these expenses in the year paid or incurred.” “If you make this choice, you will need IRS approval if you later decide to capitalize the cost of previously deducted items.”

On what counts as farmland: “Farmland, for these purposes, is land used for producing crops, fruits, or other agricultural products or for sustaining livestock.” “It doesn’t include land you have never used previously for producing crops or sustaining livestock.” “You can’t deduct initial land preparation costs.”

On a later sale, Publication 225 says: “If you sell farmland on which fertilizer or lime has been applied and if the selling price of the land includes part or all of the cost of the fertilizer or lime, you report the sale amount attributable to the fertilizer or lime as ordinary income.” That is the publication’s statement. It is not a court decision. The Code does not have a separate recapture section dedicated to Section 180, and this page does not invent one. The same point is also in the residual paragraph below.

What to check:
– How fertilizer and lime were treated on a return in a year the benefits were expected to last a year or less, and in a year the benefits were expected to last substantially more than one year.
– Whether land that had never been used to produce crops or sustain livestock was treated as farmland for this purpose.

4. Fertility that came with the land is a separate, unsettled question

Some farmland buyers, with a soil study and a purchase-price allocation, treat unexhausted fertilizer acquired with the land as a wasting asset that may be recoverable over time under §167. That treatment is unsettled and aggressive. No statute, regulation, revenue ruling, or court decision authorizes a current §180 deduction for residual fertility acquired with the land. The only IRS written determination on residual fertilizer bought with farmland, a 1991 technical advice memorandum, denied the taxpayer’s amortization claim: the taxpayer had to prove beneficial ownership, that fertilizer applied by the prior owner was present and measurable, and that it was being used up over a defined period, and did not. Whether any recovery is available, under which Code section, and over what period, depends on your facts and is a decision for you and a qualified tax professional. DeepYield does not promise a §180 election or any tax result. If you later sell the land, an amount attributable to fertilizer or lime included in the selling price may be taxed as ordinary income. A deduction that cannot be supported may be disallowed, with interest and penalties.

The hedge that Section 180 may apply depending on your facts does not convert residual fertility into a Section 180 result.

A soil fertility study may help a farmland buyer and a tax professional document nutrients on hand at purchase. Any tax treatment depends on your facts. DeepYield does not promise a deduction.

The useful window is before any lime or fertilizer is applied to the new ground. Book a short soil-study fit call at https://calendly.com/kyle_farmer/deepyield-soil-fertility-study-fit-call. The call is to see whether a soil fertility study may help you and your tax professional document nutrients on hand at purchase. It is not a promise of a Section 180 deduction or any tax result.

A free two-year look-back is also available at go.deepyield.com/two-year-lookback.

DeepYield Soil Fertility Study

5. How a DeepYield soil fertility study fits

DeepYield measures nutrient levels at acquisition against a baseline for the agricultural use, drawn from university research, and values any excess using USDA data, so you and your tax professional have a documented allocation to consider. The study is not a promise that a deduction will be allowed.

Grid-sampled soil tests, run by an independent laboratory, with a Ph.D. agronomist review of the results.

Sampling is done before any lime or fertilizer is applied to the new ground, so the tests can reflect what was present at purchase, not what is applied afterward.

The product name is DeepYield Soil Fertility Study. As further method detail, not as a tax result and not as an IRS procedure: excess, as DeepYield uses the word, is the measured level minus the baseline, nutrient by nutrient. The Code does not define that measurement as a statutory term. The method does not use hindcasting for a purchase in the same year as the study. The written report is for you and your tax professional.

What to check:
– What your tax professional has already been given, and what questions remain for that professional.

6. Related questions

Guides already live on related topics include Farmland Purchase Price Allocation: How to Split Land From Improvements, Depreciating Farm Land Improvements: Fences, Wells, Drainage Tile, and Buildings, Buying a Ranch or Farmland: Tax Questions to Raise Before Closing, Inherited Farmland: Basis and Depreciation Questions, Answered, Missed Depreciation in Past Years: Amended Return or Accounting-Method Change?, and Hobby or Business? How the IRS Looks at a Ranch.

What to bring

Your last two federal returns, including Schedule F if you filed one, invoices for fertilizer, lime and application, closing documents if you bought land, and any lease if someone else farms the land. The full list is in What to Bring to a Tax Return Review: A Checklist.

Where DeepYield fits

DeepYield is a second set of eyes, not a replacement for your CPA. For Section 180 and soil fertility, that means looking at how fertilizer and lime purchases were handled on the returns you already have, with you and your CPA, who decides what, if anything, those items mean for your return. We share what we see with you and your CPA, who can review it line by line. Sometimes the review ends with nothing to change. Kyle Farmer is a lawyer with experience in tax, corporate law and immigration. DeepYield is not a law firm and does not provide legal services; working with DeepYield does not create an attorney-client relationship. A free two-year look-back is a secondary option: a review of your last two years of tax returns, done for you, then a 30-minute call to walk through what we found. How that review works: The Free Two-Year Look-Back: What We Review and What Happens Next.

Related: Who Qualifies for Section 180, and How the Election Works · Soil fertility studies for farmland buyers · Farmland Purchase Price Allocation: How to Split Land From Improvements · Depreciating Farm Land Improvements: Fences, Wells, Drainage Tile, and Buildings · Buying a Ranch or Farmland: Tax Questions to Raise Before Closing · Inherited Farmland: Basis and Depreciation Questions, Answered · Missed Depreciation in Past Years: Amended Return or Accounting-Method Change? · Hobby or Business? How the IRS Looks at a Ranch

The useful window is before any lime or fertilizer is applied to the new ground. Book a short soil-study fit call at https://calendly.com/kyle_farmer/deepyield-soil-fertility-study-fit-call. The call is to see whether a soil fertility study may help you and your tax professional document nutrients on hand at purchase. It is not a promise of a Section 180 deduction or any tax result.

A free two-year look-back is also available at go.deepyield.com/two-year-lookback.

Frequently asked questions

What does IRC Section 180 allow?

A taxpayer engaged in the business of farming may elect under Internal Revenue Code §180 to deduct, in the year paid or incurred, amounts spent for fertilizer, lime, ground limestone, marl, or other materials that enrich, neutralize, or condition land used in farming, and the cost of applying them. The election applies only to that year, and generally cannot be revoked without IRS consent. It applies to the farmer’s own purchases of those materials for land already used in farming, not automatically to fertility that came with the land.

Who is engaged in the business of farming for Section 180?

A person who farms for recreation or pleasure rather than for profit is not engaged in the business of farming. A cash-rent landlord is engaged in the business of farming only if they participate to a material extent in the operation or management of the farm. The Section 180 regulations apply the principles of Treas. Reg. §1.175-3. Under that regulation, a taxpayer is engaged in the business of farming if the taxpayer cultivates, operates, or manages a farm for gain or profit, as owner or tenant. A rental based on farm production qualifies. A taxpayer who receives a fixed rental, without reference to production, is engaged in the business of farming only if the taxpayer participates to a material extent in the operation or management of the farm. Forestry or growing timber is not, by itself, the business of farming, and operating a farm for recreation or pleasure rather than profit is not. Whether those tests are met depends on your facts.

Does Section 180 apply to fertility that came with land I bought?

Some farmland buyers, with a soil study and a purchase-price allocation, treat unexhausted fertilizer acquired with the land as a wasting asset that may be recoverable over time under §167. That treatment is unsettled and aggressive. No statute, regulation, revenue ruling, or court decision authorizes a current §180 deduction for residual fertility acquired with the land. The only IRS written determination on residual fertilizer bought with farmland, a 1991 technical advice memorandum, denied the taxpayer’s amortization claim: the taxpayer had to prove beneficial ownership, that fertilizer applied by the prior owner was present and measurable, and that it was being used up over a defined period, and did not. Whether any recovery is available, under which Code section, and over what period, depends on your facts and is a decision for you and a qualified tax professional. DeepYield does not promise a §180 election or any tax result. If you later sell the land, an amount attributable to fertilizer or lime included in the selling price may be taxed as ordinary income. A deduction that cannot be supported may be disallowed, with interest and penalties.

What does a DeepYield Soil Fertility Study do?

DeepYield measures nutrient levels at acquisition against a baseline for the agricultural use, drawn from university research, and values any excess using USDA data, so you and your tax professional have a documented allocation to consider. The study is not a promise that a deduction will be allowed.

Written by DeepYield.

Sources

Results depend on your specific facts. No outcome is guaranteed. This is general information, not tax advice; advice is provided only under a signed engagement.

Scroll to Top