IRS
Deductions for Conservation Expenses
In general, farm landowners and tenants can deduct expenses related to soil or water conservation, farmland erosion prevention, or endangered species recovery from their federal taxes, where otherwise these would be considered capital expenses. The deduction for conservation expenses is capped at 25% of the gross income from farming. Conservation expenses can only be deducted by those in the business of farming for profit. See the IRS “Farmer’s Tax Guide” for details.
Conservation practices must be consistent with an approved Natural Resources Conservation Service (NRCS) conservation plan or a soil conservation plan from a comparable state agency. Examples of conservation practices are the movement of earth such as leveling, terracing, and contour furrowing; the construction, control, and protection of diversion channels, drainage ditches, irrigation ditches, earthen dams, and water courses and ponds; the eradication of brush, and the planting of windbreaks. Expenses incurred by draining or filling wetlands are not deductible.
Deductions for Endangered Species Recovery Expenses
If an endangered species recovery plan is approved for the area the farm land is located in, conservation expenses incurred for achieving site-specific management actions recommended in the recovery plan can also be deducted. To qualify for this deduction, there must be endangered species in the area and the conservation actions must be approved in a US Fish and Wildlife Service (USFWS) approved conservation plan.
Conservation work on any habitat type, from wetlands to pastureland, can be included, as long as it is critical habitat for an endangered species in the area and the conservation work is recommended in a species recovery plan. See USFWS ECOS website for more information on endangered species in your area.
USFWS Partners for Fish and Wildlife Program can assist landowners and tenants in determining whether planned conservation actions are consistent with site-specific management actions in an approved endangered species recovery plan.
Getting Started:
- As always, it is prudent to consult with your financial and tax adviser before making any investments in conservation practices for tax deduction purposes
- Make sure to review the IRS rules for Soil and Water Conservation Expenses
- If you are interested in an endangered species recovery conservation expense deduction, review USFWS’ webpage on Tax Deductions and familiarize yourself with any endangered species in your area
Online Resources:
- IRS conservation expense rules
- IRS Farmer’s Tax Guide 2014
- Endangered species tax deduction from USFWS
- Environmental conservation online system via USFWS
