Conservation Expenses

You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. These expenses include, but are not limited too, the following.

1. The treatment or movement of earth, such as:

  • Leveling,
  • Conditioning,
  • Grading,
  • Terracing,
  • Contour furrowing, and
  • Restoration of soil fertility

2. The construction, control, and protection of:

  • Diversion channels;
  • Drainage ditches;
  • Irrigation ditches;
  • Earthen dams; and
  • Watercourses, outlets, and ponds.

3. The eradication of brush.
4. The planting of windbreaks.

You can’t deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. These expenses are added to the basis of the land.

TAX TIP**If you choose to deduct soil and water conservation expenses, you must include as gross income any cost-sharing payments you receive for those expenses.

New farm or farmland. If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. The new farming activity doesn’t have to be the same as the old farming activity. For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses.

Land not used for farming. If your conservation expenses benefit both land that doesn’t qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. You can use another method to allocate these expenses if you can clearly show that your method is more reasonable.