Inherited Farmland and IRS Section 180: Can You Still Claim the Deduction?

Inheriting a farm is one of the most significant — and complicated — financial events a family can experience. On top of grief, there are estate questions, basis calculations, decisions about whether to keep the land or sell it, and tax implications that most families are completely unprepared for.

Here is one piece of good news: if you have inherited farmland, you may qualify for an IRS Section 180 deduction on the residual soil fertility in that land. And depending on the size and quality of the farm, that deduction could be worth tens of thousands — or hundreds of thousands — of dollars.

But there is a deadline that most families miss entirely.

The Short Answer: Yes, Inherited Farmland Can Qualify

IRS Section 180 was originally designed for farmers who purchase land. But the IRS and tax law experts have consistently recognized that inherited farmland can also qualify for the residual fertility deduction — under the right circumstances.

The logic is the same as for a purchase: when you inherit farmland, you are acquiring land that likely contains stored soil nutrients from years or decades of fertilizer applications by the prior owner. Those nutrients have value, and the law allows you to recognize that value as a deduction.

The Key Rule: Date of Death Is the Measurement Date

For inherited farmland, the IRS uses the date of the decedent’s death as the measurement date for determining residual soil fertility. In other words, the soil test is not measuring what the land contains today — it is documenting the fertility that was present when you inherited the land.

This means that soil testing should happen as soon as possible after you take ownership. The longer you wait, the more complex it becomes to establish what the soil contained at the date of inheritance.

If you have recently inherited farmland and have not yet applied fertilizer to it:
Do not fertilize until you have been soil tested. The same window that applies to purchased land applies to inherited land. Once you apply fertilizer, the baseline fertility cannot be separated from what you added — and the deduction is gone.

Step-Up in Basis and How It Interacts with Section 180

When you inherit farmland, you receive a stepped-up basis — meaning your cost basis for tax purposes is reset to the fair market value of the land at the date of the decedent’s death, rather than what they originally paid for it.

This is significant. A higher stepped-up basis means a higher starting point for the Section 180 deduction calculation. It also means that when you eventually sell the land, your capital gains will be calculated from that higher value.

Taking the Section 180 deduction will reduce your basis by the amount of the deduction — the same as it does for land purchases. Your CPA needs to factor this into the overall estate and tax planning picture.

Can the Estate Claim the Deduction? Or Do the Beneficiaries?

This is a nuanced area that your CPA needs to address specifically for your situation. In general:

The estate may be able to claim the Section 180 deduction if the estate is treated as being engaged in farming activities during the administration period and the soil testing is conducted during that time.

The beneficiaries can typically claim the deduction on the land they receive, in the tax year they take ownership and complete the soil testing — provided they meet the active farming requirement and act before fertilizing.

In many farm inheritance situations, it is the beneficiaries who ultimately claim the deduction, since they are the ones who will continue farming the land. Either way, the documentation requirements are the same: a certified agronomist must conduct the soil test and produce a defensible report.

What About Gifted Land?

It is critical to understand that gifted farmland — land transferred to you as a gift while the donor is still living — does not qualify for the Section 180 deduction in the same way. When land is gifted, no new basis step-up occurs (you generally inherit the donor’s basis), and the residual fertility deduction framework for newly acquired land does not apply.

If you have received farmland as a gift, consult your CPA about what options may be available. The situation is different from both a purchase and an inheritance.

The Three-Year Window for Amended Returns

What if you inherited farmland a year or two ago and did not know about Section 180? You may still have options.

The IRS allows taxpayers to amend a return within three years of the original filing date. If you inherited farmland within the last three tax years, have not yet fertilized the land, and can still obtain meaningful soil test data, it may be possible to amend your return and claim the deduction retroactively.

This is a complex filing and requires experienced guidance — but it has been done successfully. Contact Soil Tax Guys to discuss whether your situation qualifies.

Documents to Gather Right Away

If you have recently inherited farmland, start gathering the following as soon as possible:

Date of death documentation (required to establish the measurement date)
Legal description of the farmland inherited
Historical fertilizer application records from the prior owner, if available
Any existing soil test records from the previous owner
Crop history for the land (what was planted in recent years)

This information helps the agronomist establish the fertility baseline more precisely and makes the IRS documentation more defensible.

A Real Example from Our Records

We worked with a family in Iowa who inherited 240 acres of prime row crop ground from a father who had farmed it meticulously for 40 years. The land had been maintained with above-average phosphorus and potassium inputs throughout.

After soil testing and agronomist documentation, the family was able to claim a deduction of approximately $1,076 per acre — over $258,000 in total federal tax deductions — in the same year they inherited the land.

They found out about Section 180 three weeks after the estate was settled. They had not yet fertilized for the upcoming season. That timing made all the difference.

What to Do If You Have Just Inherited Farmland

Do not apply fertilizer until you call us.
Contact Soil Tax Guys at (217) 356-5756. We will discuss your situation, explain the process, and schedule soil sampling.
We deliver a CPA-ready agronomist report you can hand directly to your estate attorney and tax advisor.
Your CPA files the appropriate forms and documents the deduction.

The money is in the soil. The window is now. Call before you fertilize.