Land Is Not Deductible!
We had a reader ask the following question:
“Can I or my s-corp deduct the purchase of farmland as a business expense?”
The general answer to this question is no; you cannot deduct the cost of farmland as a business expense. However, you must review your purchase to determine if, in fact, you only purchased farmland. Many farmland purchases include fences, wells, irrigation systems, grain bins and other improvements that may be depreciated. If the farmland does include these items, then you would need to allocate cost to these items.
You may be able to take Section 179 on many of these items, but you would need to review them with your tax advisor to determine eligibility. Almost none of these items would be available for the 100% bonus depreciation since they are not considered “new”.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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