Depreciation of farm drainage tile on cash rented farm land?

Forum|Forum|3 years ago
March 26, 2023
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I inherited farm land that I cash rent and the renter sends me a 1099 misc each year. The income an expenses for this property are reported on a Federal Schedule E. This year I paid for field drainage tile on this land which needs to be depreciated on the return. However, I am getting a message on the Turbo tax software that this qualifies for a special depreciation allowance i.e. the whole expense . I am a bit confused as this has always been considered passive farming rental income. I do choose the renter, handle the rental contracts, and make decisions regarding maintenance and improvements but do not manage the planting decisions.

I made the decision and paid for this tiling. However, I was not aware the special depreciation rules for tax section 179 applied to me, so, I am a bit confused.

KrisD15

You are correct.

Do not use Section 179 for assets relating to rental / passive income.

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maurers180Author

I cannot figure out why the software is telling me I qualify for the special depreciation deduction. I wonder if there is a glitch in it.

PatriciaV

Employee

According to the IRS Pub 225 Farmers Tax Guide, although field drainage tile qualifies as section 179 property, farmers cannot elect the section 179 expense deduction on property you lease to others (if you are a noncorporate lessor).

This is a specific exception that may not be automatically handled by TurboTax. Since Section 179 is an election, you are given the option to take the election or not. For farm property that you lease to others, you should not elect to take Section 179 on this property.

[edited 3/27/2023 | 9:15 AM PDT]
@maurers180

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