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December 21, 2023

Is Soil Testing Worth It? 

Unlock the benefits of soil testing on your farm, including the IRS Section 180 deduction and more. 

If you’re an agricultural landowner, chances are you’ve used soil testing to customize fertilization, optimize soil health, and maximize crop yields. But are there other cost-saving opportunities you might be missing? 

In this article, we’ll break down all the benefits of soil testing so you can ensure you’re seizing the full scope of advantages when it comes to soil testing on your farm.  

Benefits of Soil Testing 

Cost Savings 

Farmers who have purchased or inherited agricultural land in the past three years are eligible for a tax deduction under IRS Section 180. Under this deduction, farmers can deduct the value of their soil fertility as an input expense on their newly acquired land.  

For most farmers, about 60 percent of expenses are deducted in the first year, 30 percent in the second year, and 10 percent in the third year. 

Increased Yields  

Soil testing combined with crop and fertilization management can increase yields significantly. After implementing soil health management, 85 percent of corn farmers and 88 percent of soybean farmers saw increased net income by an average of $52 per acre and $45 per acre for each respective commodity.  

Healthy soil can also produce healthier livestock. “If livestock are eating higher quality forage, they are more likely to grow better and have an overall healthier lifestyle,” says Cameron Flowers, Managing Director for AgAmerica. “If the animal is healthier and happier, its meat is of better quality when it reaches the consumer.” 

Increased Land Value 

Soil testing often leads to healthier soil as farmers adjust their strategies to nurture their land. This not only helps increase crop yields, but also increases the value of the land itself. Appraisers evaluate agricultural land by analyzing historical yield records, considering the presence of current irrigation or the possibility of implementing new irrigation systems, and examining border features to understand their potential impact on soil quality and productivity. Healthier soil often results in high land valuation.  

Regenerative Farming 

The USDA has several programs designed to help farmers increase the health of their soil, like the Conservation Stewardship Program (CSP), Environmental Quality Incentives Program (EQIP), and more. Many programs include financial assistance. For farmers who haven’t recently purchased or inherited land, these regenerative farming programs can offer kickbacks for soil testing and soil management that the IRS Section 180 deduction can’t cover.  

Soil Testing for IRS Section 180 Deduction 

Let’s break down an example of soil testing in action. Here’s a high-level case study of what the soil testing process is like with AgAmerica:

  1. The landowner had an introductory call with AgAmerica’s soil testing partner to answer all questions. 
  1. After signing an agreement, two parcels of land, 650 and 70 acres respectively, were submitted for testing. 
  1. AgAmerica’s soil testing partner surveyed the land and created field maps, collecting 72 total soil samples. 
  1. The samples were sent to a lab to measure the nutrient load.  
  1. After about a month, the final results were available for review. The total nutrient value was calculated at $1.4MM (or $2K per acre). 
  1. The landowner could now claim a depreciable asset worth $1.4MM as a tax deduction over the next three to five years.  

“The whole process took less than three months and only required access to the property one time to take soil samples,” said Walker Gibson about his experience using the service. “They’re a professional outfit but took the time to explain how the program works in terms that could be easily understood. Ultimately, for a modest upfront fee, the operation is now armed with the necessary documentation to take a significant tax deduction over the next few years.”  

Required Documents for Soil Testing 

Farmers who qualify for an IRS Section 180 deduction can choose to file for the deduction on their own or collaborate with an organization like AgAmerica’s partner to guide them through the steps and streamline the tax process.  

Typically, farmers filing for the deduction are asked to provide:  

  • Land Acquisition Records: Records of the land acquisition transaction, including purchase agreements, deeds, or other legal documents that establish ownership.  
  • Ownership Change Documentation: If the land was acquired through exchange or inheritance, documentation that verifies the change in ownership and the relevant dates.  
  • Soil Analysis Report: A soil analysis report conducted by a qualified professional. The report should assess the residual fertility value of the soil at the time of land purchase.  
  • Receipts and Invoices for Cost of Consulting: If you consulted with experts, advisors, or consultants to determine the residual fertility value, provide receipts and invoices for their services as evidence of the associated costs.  
  • Correspondence with Experts, Advisors, or Consultants: Any correspondence or communication with professionals involved in the valuation process. This includes emails, letters, or notes that outline the methodology and findings related to the soil fertility valuation. 

Unlock the Benefits of Section 180 Deduction Through Soil Testing Today 

AgAmerica uses the best in class to provide comprehensive soil testing and reporting to be used for the IRS section 180 tax deduction. When you partner with us, we’ll take care of every step—from soil analysis to documentation—to make it easy to qualify under IRS Section 180. Our clients save $12 for every $1 they spend on soil testing.  

Get the most out of your farmland. Click the link below or contact us directly to learn more about AgAmerica’s soil testing and tax services.  

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