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Find Hidden Tax Deductions in Your Soil

Unlock the tax potential of your agricultural land.

Simply fill out the form to schedule your complimentary tax savings consultation for your newly acquired agricultural land (including crop and grazing land).

What happens next? Once we receive your submission, one of our team members will reach out in 5 to 7 business days to schedule your land fertility consultation.

Together, during your consultation, we will review your recent farmland acquisitions, answer any questions you may have about farm deductions related to land fertility, and develop a plan for your Legacy Nutrient Deduction™ analysis.

Looking to expedite the process? For those who have all the details about their recent land acquisitions and want to fast-track the process, consider using our Request for Services form instead. This form ensures we have all the necessary information to review your acquisitions and jumpstart the development of your plan. 

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Through Legacy Nutrient Deductions™, our advanced tax services and scientific reporting helps maximize income tax deductions for ag land.

If you purchased or inherited farmland with the last 15 years, you may qualify for tax deductions based on nutrients found on your farm or ranch. 

$1,700/acre average savings

How is this possible? Owners of agricultural properties tend to be deeply experienced with capturing accelerated deductions on capital items such as fencing, irrigation, and structures to improve the tax efficiency of their holdings. However, very few are aware that they can capture soil fertility-related deductions as well.

This allows for an overlooked farm tax deduction that is determined according to the levels of excess fertility in your recently acquired soil. Savings related to recently acquired farmland can be substantial.

Learn More

Watch the video to hear Dave, a farmer in Iowa, tell his story.

The Results Speak for Themselves​

"I have been farming for a long time, and it was hard for me to understand this process, I thought if it was real, I would have already known about it. The truth is it’s real, it works, and the Boa Safra team is very professional. The whole process was easy and 100% turnkey. My only regret is not doing this sooner. Call these guys, you will be happy you did.”
Paul T.
Iowa
"I had never heard about Boa Safra, legacy nutrient deductions, or the different tax codes they use. The team walked me through the program, answered all my questions and as a result, I was able to utilize a $220,000 deduction. Real money for my operation.”
Jon H.
Kansas
"I got a mailer and was a skeptic but decided to call. I found the Boa Safra team to be very informative, responsive, and well-versed regarding soil fertility load analysis which is the key to IRS section 180. I decided to go with them. I saved over $400,000 off my tax bill.”
Luke M.
Michigan

Frequently Asked Questions

Table of Contents

SECTION 1.

General Information about Legacy Nutrient Deductions™

Legacy Nutrient Deductions™ are tax deductions tied to the value of the crop-producing nutrients present in the soil of agricultural land at the time of its purchase or inheritance. These nutrients, such as phosphorus (P), potassium (K), and other macro- and micro-nutrients, contribute to the land’s productivity and overall value.

Legacy Nutrient Deductions™ allow landowners to deduct the value of these nutrients from their taxable income, reducing their income tax liability. This deduction is based on the fact that soil nutrients are part of the real estate purchase and are deductible under existing U.S. tax law.

To claim these deductions, landowners must work with qualified professionals who can accurately assess and document the soil’s nutrient content according to IRS guidelines. This process involves comprehensive soil testing and analysis to determine nutrient levels and their value.

With nearly 75,000 pages of tax codes and guidelines, it isn’t surprising that you haven’t heard of this before.  The sections related to Legacy Nutrient Deductions™—Sections 167, 168, 180, and 611—are brief, and were written decades ago. Section 180, for example, is just a short paragraph written over 60 years ago. 

Until recently, there hasn’t been a scientifically repeatable and defensible process for meeting the IRS guidelines for pursuing this type of deduction. Boa Safra has developed that process, enabling landowners to unlock the benefits of these overlooked sections of code.

“Boa Safra” is a Portuguese term that translates to “Good Harvest” in English. The name reflects the company’s dedication to helping agricultural landowners optimize the financial benefits of their land, leading to more prosperous outcomes.

SECTION 2.

Eligibility and Qualifications

To qualify for Legacy Nutrient Deductions™, the taxpayer must own agricultural land (such as farmland, ranchland, and in some cases, timberland), and have enough tax basis to depreciate their asset.  

In order to qualify for section 180, agricultural landowners must also be “in the business” of farming or ranching. This means the taxpayer must be actively engaged in farming or ranching activities with the primary intention of making a profit. The IRS requires that the landowner meets specific criteria to be considered as operating a farming or ranching business, which typically includes:

  • Regular Engagement: The landowner must regularly engage in farming or ranching activities, such as planting, cultivating, and harvesting crops, or raising livestock.
  • Profit Motive: The primary purpose of the activities must be to generate a profit, rather than being a hobby or for personal pleasure.
  • Consistency: The landowner should demonstrate consistent efforts to improve the profitability and efficiency of their farming or ranching operations.

Proper documentation and records of farming, ranching, or agricultural use of timberland activities and expenses will be necessary to support the claim for Legacy Nutrient Deductions™.

If the landowner does not meet these requirements, they may not be eligible for these specific deductions, even if they own agricultural land or timberland used for non-agricultural purposes.

To use Section 180, yes, the taxpayer must be engaged in farming or ranching. However, Sections 167, 168, and 611 do not require the landowner to be involved in the business of farming or ranching to qualify for a Legacy Nutrient Deduction™.

The next generation can take deductions again on inherited land, making it most beneficial for properties intended to be kept for a long period of time. It’s important to note that inheritance is not the same as gifting; gifted land is not eligible for this deduction.

Yes, Legacy Nutrient Deductions™ can be applied in a 1031 exchange, as long as the new property acquired has enough basis to support the deductions.

  • Timber: To qualify, the timber must be cut and sold.
  • Livestock Grazing: Land used for cattle or livestock grazing may still be eligible for the deduction.
  • Pine Straw: Pine straw operations may also qualify, depending on the specific circumstances.

You may be less likely to qualify if:

  • The property is less than 10 acres, as it may not be beneficial.
  • You have a net passive income of less than $50,000 per year, which may not provide much value.
  • The longest amortization schedule available is 7 years, so if you cannot fully utilize the deduction within this timeframe, it may not be worthwhile.
  • This deduction can be traced back to the 1960s, but it is most advantageous for land acquired or inherited with a step-up in basis from the early 2010s onwards.

SECTION 3.

Tax Codes and Savings

Legacy Nutrient Deductions™ can be filed under four sections of the IRS tax code. Those sections are 167, 168, 180, and 611.

If you purchased or inherited your land this year, and you meet the IRS’ definition of being actively engaged in the business of farming or ranching, you may qualify for section 180.  Section 180 allows you to take the full deduction in the year that you acquire your property.  

If you do not meet the IRS’ definition of being actively engaged in the business of farming or ranching, or you acquired or inherited your land in a prior year, you may qualify for sections 167, 168, or 611.  However, as a tradeoff for the increased flexibility, these sections require that you spread the deduction out over several years. Typically, we see clients spread the deduction out between 3-7 years under these sections of code.

Section 180 is one of several sections of the Federal Tax Code that allow owners of agricultural land to benefit from Legacy Nutrient Deductions™. Legacy nutrients are the crop and forage producing nutrients (such as your Ps, Ks, and micros) that are present in your soil at the time you purchase or inherit your property. Section 180, in addition to other sections, allow you to deduct the value of these legacy nutrients to help you spend less on your income taxes.

Section 180 allows landowners to deduct the full value of their legacy nutrients in the year of filing, while other sections require that the deduction be spread out over multiple years. Landowners must meet the criteria of being “in the business” of farming or ranching to qualify for Section 180, and the deduction must be filed on a timely basis.

Legacy Nutrient Deductions™ can be quite significant, typically falling within 10%-15% of the market value of the land.  This can protect a substantial amount of operating profit, giving farmers, ranchers, and agricultural landowners another tool in their toolbelt to optimize their profitability.

The benefits can extend well beyond saving on income taxes. Farmers, ranchers, and agricultural landowners can benefit from deductions on land that they’ve already bought or inherited, rather than spending their cash at year end for tax planning and ending up with more expensive assets to maintain. Farmers, ranchers, and agricultural landowners can also reinvest their tax savings into new land purchases, which they can take this deduction on and continue to build their land base!

The financial returns can be substantial for landowners, in many cases exceeding $1,500/acre of deduction. Landowners need to have enough basis (what they paid or inherited the property for) to benefit from these deductions.  In general, we find landowners with at least $500 per acre of basis receive the greatest benefit of pursuing Legacy Nutrient Deductions™.

Here are two specific examples below:

  1. A rancher in Nebraska purchased high-quality grazing pasture at $2,450 per acre, which included new water systems and good fences. Boa Safra’s soil data and legacy nutrient analysis valued the legacy nutrients at over $900 per acre. By properly deducting legacy nutrients and segregating the costs of water systems and fences, the buyer recovered about half of the total purchase cost through federal tax deductions.

  2. Another example involves a farmer who bought land he had been renting for years. Purchased at market price during a public auction, he recovered 15% of the purchase price through soil nutrient deductions, significantly reducing his income tax burden. Initially, his CPA was concerned about ‘double-dipping’ since the farmer had previously deducted input costs. However, our analysis found that tenants typically do not overspend on fertilizer for rented farms. This farmer used agronomists to apply targeted fertilizer designed for specific crop yields, with crops harvested and removed from the farm. Boa Safra’s hindcasting capabilities confirmed that the legacy nutrient load remained consistent before and after the purchase, validating the deduction.

The deduction value is proportional to your tax bracket. For example, if the legacy nutrients are valued at $1,700 per acre, here’s how the cash savings and return on investment are calculated:

  • Deduction/Acre: $1,700
  • Cost/Acre: $40 (the price for Boa Safra’s services)

Depending on your tax bracket:

  • 10% tax bracket: Cash savings of $170 per acre, with a 4.25x return on invested capital
  • 20% tax bracket: Cash savings of $340 per acre, with an 8.5x return on invested capital
  • 30% tax bracket: Cash savings of $510 per acre, with a 12.75x return on invested capital
  • 40% tax bracket: Cash savings of $680 per acre, with a 17x return on invested capital

This shows how the tax savings increase as your tax bracket increases, yielding a higher return on the cost invested per acre.

SECTION 4.

Filing and Deduction Process

Landowners can claim Legacy Nutrient Deductions™ on current-year tax returns, amend returns or file Form 3115 for the last three tax years, or file Form 3115 for prior year purchases or inheritances. Each method has specific requirements and benefits, making it essential to consult with a qualified CPA. If you’re electing to deduct legacy nutrients for the first time on previously purchased or inherited land, filing Form 3115 is strongly recommended to notify the IRS of the change in accounting method. Without this form, the IRS may disallow the deduction.

For first-time farmland or ranchland purchases in the current year, filing Form 3115 is not necessary as long as the return is filed on time.

Under Section 180, farmers and ranchers can use up to 100% of the deduction in the year of filing. However, Sections 167, 168, and 611 require amortizing the deduction over multiple years. Most clients choose amortization periods ranging from 3 to 7 years, based on the professional judgment of the client and their tax professional.

It depends on your preference and your CPA’s advice. Farmers and ranchers can use the full deduction in one year under Section 180, or amortize it over several years using Sections 167, 168, and 611. While there are no strict guidelines, most customers choose a depreciation schedule of 3 to 7 years. Any unused portion of the deduction becomes a carryforward loss that can be applied in future years.

No, a Legacy Nutrient Deduction™ does not need to be filed for the tax year in which the land was acquired. Landowners have the flexibility to retroactively claim these deductions for up to 15 years. This means that if the land was purchased or inherited within this timeframe, the landowner can still file for the deduction and benefit from the tax savings associated with the legacy nutrients present in the soil at the time of acquisition.

Boa Safra Ag has pioneered the method to backtrack and determine the nutrients present in the soil at the time of acquisition. Through advanced scientific methods and comprehensive soil data analysis, Boa Safra Ag can accurately identify and document the legacy nutrients, enabling landowners to claim the appropriate deductions even years after the land was initially acquired. This innovative approach ensures that landowners can fully optimize their tax benefits regardless of when they acquired their agricultural property.

Yes, you can potentially deduct residual fertilizer if you were previously renting the land you bought, but there are specific considerations and requirements to keep in mind:

Ownership Transition:

When you transition from renting to owning the land, you may be eligible to deduct the value of the residual fertilizer present in the soil at the time of purchase. This deduction recognizes the pre-existing nutrient value that benefits your farming operations.

Documentation and Soil Testing:

It is crucial to conduct comprehensive soil testing at the time of purchase to establish the baseline nutrient levels in the soil. This provides the necessary documentation to support the deduction claim. Historical records of fertilizer applications, crop yields, and soil tests during the rental period can also help substantiate the presence of residual fertilizer.

IRS Guidelines:

The IRS requires that deductions for residual fertilizer be properly documented and that the taxpayer meets the criteria of being “in the business” of farming or ranching. This means that your farming activities must be conducted with the primary intention of making a profit.

Avoiding Double Dipping:

One concern is the potential for “double-dipping,” where the same fertilizer expenses are deducted twice—once as a rental expense and again as a residual fertilizer deduction. To avoid this, you need to clearly differentiate between the fertilizer expenses claimed during the rental period and the residual value at the time of purchase.

Consult with a qualified tax professional to ensure that your deduction is appropriately documented and compliant with IRS regulations.

Qualified Third-Party Appraisal:

Engaging a qualified third party, such as Boa Safra Ag, to conduct soil testing and provide an appraisal of the residual fertilizer can strengthen your deduction claim. Boa Safra Ag’s expertise in hindcasting nutrient levels and providing audit-tested reports can help you accurately document and justify the deduction.

By following these guidelines and ensuring proper documentation, you can potentially deduct the value of residual fertilizer when you transition from renting to owning the land, thereby optimizing your tax benefits.

SECTION 5.

Impact on Land Value and Taxation

Legacy Nutrient Deductions™ will reduce the land’s basis, which can increase the taxes due when the property is sold. This recapture may be fully taxed as ordinary income or a combination of Section 1231 capital gain and ordinary income, depending on the amount of excess fertility remaining at the time of sale. The IRS has not directly addressed how recapture should be handled. However, this issue is resolved when landholdings are passed onto future generations, as the basis is stepped up at the time of inheritance.

For landowners planning to hold their property for 5+ years, the immediate savings from Legacy Nutrient Deductions™ are often substantial. However, landowners intending to sell within a year or two may not find it as beneficial. Those considering a 1031 exchange can roll profits from the sale into a new property, deferring potential capital gains at the time of the exchange.

Yes, claiming a Legacy Nutrient Deduction does reduce the basis of your land purchase. Here’s how it works:

1. Initial Basis Calculation:

The basis of your land is generally the purchase price plus any capital improvements made to the property. This initial basis is used to determine depreciation, amortization, and potential gain or loss upon the sale of the property.

2. Reduction of Basis by Deductions:

When you claim a Legacy Nutrient Deduction, the value of the nutrients deducted must be subtracted from the land’s basis. This reduction reflects that a portion of the purchase price attributed to these nutrients has been expensed as a deduction.

3. Impact on Future Calculations:

Reducing the basis means that the adjusted basis of your land will be lower. This impacts future tax calculations, such as determining depreciation, calculating gain or loss on a sale, and other basis-related tax events. For example, if you purchased land for $1,000,000 and claimed $100,000 as a Legacy Nutrient Deduction, your new basis in the land would be $900,000.

4. Documentation and Compliance:

It is essential to keep detailed records of the deductions claimed and the adjustments made to your land’s basis. Proper documentation ensures compliance with IRS regulations and provides a clear audit trail.

5. Consulting a Tax Professional:

Given the complexity of basis adjustments and tax implications, consulting a qualified tax professional is advisable. They can help ensure that your deductions and basis adjustments are accurately calculated and compliant with tax laws.

In summary, claiming a Legacy Nutrient Deduction will reduce the basis of your land purchase, affecting future tax calculations. Proper documentation and professional advice are crucial to manage these adjustments correctly.

If the purchase price is allocated to fertilizer and other farm or ranch-related assets, it typically results in ordinary income for the seller, which is taxed at a higher rate than capital gains.

SECTION 6.

IRS and Audit Considerations

Two significant IRS authorities outline how agricultural landowners can benefit from Legacy Nutrient Deductions TM: the Private Letter Ruling 9211007 (PLR) and the Market Segment Specialization Program Training 3149-122 (MSSP).


Private Letter Ruling 9211007 (PLR)

Issued on December 3, 1991, the PLR sets out four key criteria for landowners to amortize the cost of

fertilizer acquired with the land:

  1. Establish the presence and extent of the fertilizer.
  2. Show the level of soil fertility attributable to fertilizer applied by the previous owner.
  3. Provide a basis to measure the increase in fertility in the land.
  4. Evidence indicating the period over which the fertility attributable to the residual fertilizer will be exhausted.

 

Market Segment Specialization Program Training 3149-122 (MSSP)

The MSSP, issued in July, 1995, reiterates these points and adds that landowners must also prove beneficial ownership of the residual fertilizer supply. This means having comprehensive documentation, including soil tests and analytics, to quantify the volume of fertilizer present at the time of purchase or inheritance.

An audit covers all of your tax returns and is managed by your CPA. Boa Safra’s team will support the audit process, assisting the auditor in reviewing and understanding our methodologies, reporting, and results. If needed, Boa Safra team members can interface directly with the auditor regarding your Legacy Nutrient Deduction™.

As of this writing, Boa Safra has a 100% success rate in IRS audits. Six clients have undergone audits, with deduction values ranging from tens of thousands to millions of dollars. All reports have been accepted without any adjustments.

SECTION 7.

Service Details and Costs

$40 per acre (with soil sampling)

Yes, the turnkey service, which includes soil samples and reports, costs $40 per acre, and this cost is a deductible item.

  • For properties under 160 acres: billed upon delivery of the report.
  • For properties over 160 acres: 1/3 is due upfront, with the remaining 2/3 billed upon delivery of the report.

Boa Safra offers a turnkey service that includes soil sampling, nutrient analysis, and detailed reports to help landowners claim Legacy Nutrient Deductions™. These services ensure that agricultural landowners can accurately assess the nutrient content in their soil and maximize their tax deductions. Boa Safra also works closely with CPAs to provide documentation and support during the tax filing process and, if necessary, during IRS audits.

SECTION 8.

Technical Considerations and Soil Testing

The Boa Safra process involves several key steps:

  1. Initial Consultation: We begin with a consultation to understand your land and potential eligibility for Legacy Nutrient Deductions™.
  2. Data Collection: You’ll provide relevant documents, including purchase records, fertility application histories, and crop production records. If soil sampling is required, we will coordinate this process.
  3. Soil Sampling (if needed): If necessary, soil samples are collected from your land, typically in 10-acre grids, to determine nutrient levels.
  4. Analysis and Reporting: Our analysts review the data and soil samples to calculate the potential deduction. This analysis is then compiled into a comprehensive report.
  5. Report Review: We work closely with you and your CPA to review the report and ensure it aligns with your tax strategy.
  6. Filing: Once the report is finalized, it can be used to claim deductions on your federal tax return, with support from CPAs who stand behind the accuracy of our reports.
  7. Ongoing Support: We provide ongoing support to ensure you maximize your deductions and are prepared in the event of an audit.

If there is a gap between the purchase and soil sampling, our analysts will need records of fertility applications and crop production during that time to account for any changes in nutrient levels. For ranchland, grazing records, including stocking rates, stocking densities, and any fertilizer application records (if applicable), will also be required.

We generally do not recommend testing land purchased over 15 years ago due to factors that affect the deduction value for excess fertility. The deduction is based on the nutrient load (lbs/acre) and the fair market price of nutrients at the time the land was purchased or inherited. Older purchases typically reflect lower nutrient prices, resulting in a reduced return on investment (ROI). Boa Safra recommends focusing on purchases from 2010 onward for the most favorable outcomes, though exceptions can be made with further analysis.

Legacy Nutrient Deductions are based on the value of the crop and forage producing nutrients present in your soils at the time that you purchased or inherited your property.  In order to establish that value, Boa Safra must establish the volume of nutrients present at that moment in time, and then price those nutrients appropriately. 
 
The method of establishing the volume of nutrients present at the time of acquisition or inheritance varies between crop and grazing land.  
 
For crop land, owners must provide the fertilizer application and crop productions records for the intervening years between when they took title to the property and when they engage us to begin this process.  
 
For ranch land, owners provide information on their grazing practices such as stocking rates and stocking densities for the intervening years between when they took title to the property and when they engage us to begin this process.
 
Boa Safra uses this information to quantify the build-up or draw-down of nutrients based off of these practices.  It then makes the appropriate adjustments to the results of current soil tests on the property to accurately establish the volume of nutrients present at the time of acquisition or inheritance. 
 
Once this step is complete, Boa Safra matches the volumes of those nutrients with a price list that reflects the market price of those nutrients in the region that the property is in, at the time that the property was acquired or inherited.  
 
This completes the process by which Boa Safra allows landowners of previously purchased or inherited properties to benefit from Legacy Nutrient Deductions. 

The process typically takes around 55-60 days from the time you sign the documents to receiving your report. If soil sampling is not required, the timeline can be shortened to 30 days. However, in the Midwest, the timeline may be delayed due to crops still being in the fields, as soil testing would need to wait until after harvest.

Grid sample sizes can range from 2.5-acre to 10-acre grids for cropland, and larger grids for ranchland, depending on the layout of the farm and soil types. For example, a 10-acre area would require 1 sample, and a 30-acre area would require 3 samples. We usually conduct soil analysis using 10-acre grids, with samples taken at a depth of 6 ¾ inches. Additionally, a PT2 test is recommended every 4 years, though it is not factored into the initial grid sampling.

Macro nutrients:

  • Nitrogen
  • Phosphorus
  • Potassium
  • Calcium
  • Magnesium

Micro nutrients:

  • Zinc
  • Boron
  • Iron
  • Manganese

Micro nutrients can add anywhere from $100 to $400 per acre in deductions.

The utilization or depletion of nutrients depends on various factors, and Boa Safra Ag provides a 4-year straight-line depreciation schedule as a general guideline. For specific details, it’s recommended to consult with your tax advisor.

SECTION 9.

Ownership and Land Considerations

  • If the land was initially owned by a minority owner in an LLC, the deduction period begins when they gain full ownership.
  • If the land was fully owned by an individual and then transferred to an LLC they are part of, the deduction period starts from when they owned it individually.
  • The IRS generally does not differentiate between individual ownership and LLC ownership for these deductions.

Land ownership is officially recognized when the title is transferred.