Section 179 vs. Section 180: What Every Farmer Needs to Know

If you have spent any time talking to your CPA about farm tax deductions, you have probably heard Section 179 mentioned. You may have even heard Section 180. Most farmers — and, frankly, many CPAs — assume they are the same thing, or that one supersedes the other.

They are not the same. They cover completely different assets. And in the right circumstances, you can claim both in the same tax year.

Here is a clear breakdown of each, and what they mean for your tax situation.

Section 179: Expensing Farm Equipment and Personal Property

Section 179 is the deduction most farmers know well. It allows you to deduct the full cost of qualifying business property — equipment, machinery, and certain improvements — in the year you place it into service, rather than depreciating it over several years.

Under Section 179, qualifying property includes:

• Tractors, combines, planters, and other farm machinery
• Farm vehicles, including trucks used in the farming operation (business use must be substantiated)
• Single-purpose agricultural or horticultural structures
• Irrigation equipment and water systems
• Drainage tile and certain land improvements

The 2025 deduction limit for Section 179 is $1,220,000, with a phase-out beginning at $3,050,000 of total qualifying property placed in service. The deduction cannot exceed your net taxable income from active business activities.

In short, Section 179 is about the physical assets you acquire and put to work on the farm. It reduces the tax burden on equipment purchases that would otherwise be spread out over a five- to seven-year depreciation schedule.

Section 180: The Soil Fertility Deduction Most Farmers Miss

Section 180 is different in almost every way. It does not apply to equipment. It does not apply to improvements. It applies to the soil itself — specifically, to the residual fertility present in farmland when you purchase or inherit it.

When a farmer manages land carefully over many years, they apply fertilizer — phosphorus, potassium, calcium, lime, and other inputs — that accumulates in the soil. That stored fertility has a specific, measurable dollar value. When you buy that land, you are purchasing those nutrients along with the acres.

Section 180 allows you to deduct the value of that residual fertility as a business expense. On well-managed cropland, that deduction commonly ranges from $400 to $2,000+ per acre. On some high-productivity Midwest farmland, we have documented deductions exceeding $4,000 per acre.

The key requirements for Section 180 are:

• You must be engaged in the business of farming
• The land must have been recently purchased or inherited
• Soil testing must be completed before any new fertilizer is applied
• A certified agronomist must document the excess fertility and its value

Side-by-Side Comparison

Can You Claim Both Section 179 and Section 180 in the Same Year?

Yes — and this is where it gets interesting for farmers making a large land acquisition.

If you purchase a piece of farmland and also invest in new equipment for that operation in the same tax year, you can claim Section 179 on the equipment and Section 180 on the soil fertility of the new land. These are completely independent deductions applied to different assets.

Example: You purchase 400 acres of Illinois cropland and also buy a new combine ($450,000) in the same year. Your Section 179 deduction covers the combine. Your Section 180 deduction — based on soil testing — covers the residual fertility in the land. On quality Midwest cropland, that Section 180 deduction could easily add $400,000 to $800,000 of additional deductions on top of the equipment write-off.

That is a significant combined tax reduction — from a single year’s activity.

The One Situation Where Section 180 Beats Section 179

Section 179 has an income limitation — you cannot claim more than your net income from active business. If you have a low-income year, your Section 179 deduction may be limited or even zeroed out (though it can be carried forward).

Section 180 does not have the same income limitation concern in the same way. The deduction is tied to the asset itself — the soil — not to equipment placed in service. This makes it a useful planning tool for years when your taxable income from other sources is high and you are looking for a significant offset.

The Most Common Confusion Between the Two

Farmers often ask if they can use Section 179 to expense the cost of fertilizer or soil inputs they purchase for an existing farm. The answer is no — Section 179 does not cover consumable inputs. Fertilizer purchased and applied to land you already own is simply deducted as a farm business expense on Schedule F.

Section 180 is the only provision specifically written to capture the value of fertility that was already in the ground when you bought the land. That is a very specific window — and once it closes (when you fertilize), it never reopens.

Bottom Line

Section 179 should be part of every farmer’s tax planning when they are buying equipment. It is well-known, well-documented, and your CPA has almost certainly used it for you before.

Section 180 is the one most farmers and their CPAs are not using — even when the money is sitting right there in the soil. If you have purchased farmland in the past year and have not yet been soil tested, that deduction is still available to you. But only if you act before your first fertilizer application.

Did you buy farmland in the past 12 months?
Run your free estimate at soiltaxguys.com/section-180-calculator or call (217) 356-5756. It takes two minutes and could change your tax picture significantly.