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2012 E File

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2012 E File

2012 e file Publication 509 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. 2012 e file Tax questions. 2012 e file Background Information for Using the Tax CalendarsElectronic deposit requirement. 2012 e file Legal holidays. 2012 e file Statewide legal holidays. 2012 e file Future Developments For the latest information about developments related to Publication 509, such as legislation enacted after it was published, go to www. 2012 e file irs. 2012 e file gov/pub509. 2012 e file What's New Publication 1518 discontinued after 2013. 2012 e file  Publication 1518, IRS Tax Calendar for Small Businesses and Self-Employed, is discontinued after 2013. 2012 e file An IRS Tax Calendar and most of the information previously contained in Publication 1518 can be found at www. 2012 e file irs. 2012 e file gov/taxcalendar. 2012 e file Reminders Photographs of missing children. 2012 e file  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2012 e file Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2012 e file You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2012 e file Introduction A tax calendar is a 12-month calendar divided into quarters. 2012 e file The calendar gives specific due dates for: Filing tax forms, Paying taxes, and Taking other actions required by federal tax law. 2012 e file What does this publication contain?   This publication contains the following. 2012 e file A section on how to use the tax calendars. 2012 e file Three tax calendars: General Tax Calendar, Employer's Tax Calendar, and Excise Tax Calendar. 2012 e file A table showing the semiweekly deposit due dates for payroll taxes for 2014. 2012 e file   Most of the due dates discussed in this publication are also included in the IRS Tax Calendar available at www. 2012 e file irs. 2012 e file gov/taxcalendar. 2012 e file Who should use this publication?   Primarily, employers need to use this publication. 2012 e file However, the General Tax Calendar has important due dates for all businesses and individuals. 2012 e file Anyone who must pay excise taxes may need the Excise Tax Calendar . 2012 e file What are the advantages of using a tax calendar?   The following are advantages of using a calendar. 2012 e file You do not have to figure the due dates yourself. 2012 e file You can file or pay timely and avoid penalties. 2012 e file You do not have to adjust the due dates for Saturdays, Sundays, and legal holidays. 2012 e file You do not have to adjust the due dates for special banking rules if you use the Employer's Tax Calendar or Excise Tax Calendar . 2012 e file Which calendar(s) should I use?   To decide which calendar(s) to use, first look at the General Tax Calendar and highlight the dates that apply to you. 2012 e file If you are an employer, also use the Employer's Tax Calendar . 2012 e file If you must pay excise taxes, use the Excise Tax Calendar . 2012 e file Depending on your situation, you may need to use more than one calendar. 2012 e file Table 1. 2012 e file Useful Publications IF you are. 2012 e file . 2012 e file . 2012 e file THEN you may need. 2012 e file . 2012 e file . 2012 e file An employer • Publication 15 (Circular E), Employer's Tax Guide. 2012 e file  • Publication 15-A, Employer's Supplemental Tax Guide. 2012 e file  • Publication 15-B, Employer's Tax Guide to Fringe Benefits. 2012 e file  • Publication 926, Household Employer's Tax Guide. 2012 e file A farmer • Publication 51 (Circular A), Agricultural Employer's Tax Guide. 2012 e file  • Publication 225, Farmer's Tax Guide. 2012 e file An individual • Publication 505, Tax Withholding and Estimated Tax. 2012 e file Required to pay excise taxes • Publication 510, Excise Taxes. 2012 e file What is not in these calendars?   The calendars do not cover the employment or excise tax deposit rules. 2012 e file You can find the deposit rules for employment taxes in Publication 15 (Circular E), Employer's Tax Guide. 2012 e file The deposit rules for excise taxes are in Publication 510, Excise Taxes, and in the Instructions for Form 720, Quarterly Federal Excise Tax Return. 2012 e file In addition, the calendars do not cover filing forms and other requirements for: Estate taxes, Gift taxes, Trusts, Exempt organizations, Certain types of corporations, or Foreign partnerships. 2012 e file What other publications and tax forms will I need?   Table 1 lists other publications you may need to order. 2012 e file Each calendar lists the forms you may need. 2012 e file   See How To Get Tax Help near the end of this publication for information about getting publications and forms. 2012 e file Comments and suggestions. 2012 e file   We welcome your comments about this publication and your suggestions for future editions. 2012 e file   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2012 e file NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2012 e file Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2012 e file   You can send us comments from www. 2012 e file irs. 2012 e file gov/formspubs. 2012 e file Click on More Information and then click on Comment on Tax Forms and Publications. 2012 e file   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our forms and publications. 2012 e file Ordering forms and publications. 2012 e file   Visit www. 2012 e file irs. 2012 e file gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 2012 e file Internal Revenue Service 1201 N. 2012 e file Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2012 e file   If you have a tax question, check the information available on IRS. 2012 e file gov or call 1-800-829-1040. 2012 e file We cannot answer tax questions sent to either of the above addresses. 2012 e file Background Information for Using the Tax Calendars The following brief explanations may be helpful to you in using the tax calendars. 2012 e file IRS e-services make taxes easier. 2012 e file   Now more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. 2012 e file Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make taxes easier. 2012 e file    You can e-file your Form 1040; certain business tax returns such as Forms 1120, 1120S, and 1065; certain employment tax returns such as Forms 940 and 941; certain excise tax returns such as Forms 720, 2290, and 8849; and Form 1099 and other information returns. 2012 e file Visit www. 2012 e file irs. 2012 e file gov/efile for more information. 2012 e file You can pay taxes online or by phone using the Electronic Federal Tax Payments System (EFTPS). 2012 e file For detailed information about using this free service, see Electronic deposit requirement below. 2012 e file   Use these electronic options to make filing and paying taxes easier. 2012 e file For more information on electronic payments, visit the IRS website at www. 2012 e file irs. 2012 e file gov/e-pay. 2012 e file Tax deposits. 2012 e file   Some taxes can be paid with the return on which they are reported. 2012 e file However, in many cases, you have to deposit the tax before the due date for filing the return. 2012 e file Tax deposits are figured for periods of time that are shorter than the time period covered by the return. 2012 e file See Publication 15 (Circular E) for the employment tax deposit rules. 2012 e file For the excise tax deposit rules, see Publication 510 or the Instructions for Form 720. 2012 e file    Electronic deposit requirement. 2012 e file   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). 2012 e file Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). 2012 e file EFTPS is a free service provided by the Department of Treasury. 2012 e file If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2012 e file   To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD/TTY). 2012 e file You can also visit the EFTPS website at www. 2012 e file eftps. 2012 e file gov. 2012 e file Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. 2012 e file    If you fail to timely, properly, and in full make your federal tax deposit, you may be subject to a failure-to-deposit penalty. 2012 e file For an EFTPS deposit to be on time, you must initiate the deposit by 8 p. 2012 e file m. 2012 e file Eastern time the day before the date the deposit is due. 2012 e file Saturday, Sunday, or legal holiday. 2012 e file   Generally, if a due date for performing any act for tax purposes falls on a Saturday, Sunday, or legal holiday, the act is considered to be performed timely if it is performed no later than the next day that is not a Saturday, Sunday, or legal holiday. 2012 e file The term legal holiday means any legal holiday in the District of Columbia. 2012 e file The calendars provided in this publication make the adjustment for Saturdays, Sundays, and legal holidays. 2012 e file But you must make any adjustments for statewide legal holidays, as discussed next. 2012 e file An exception to this rule for certain excise taxes is noted later under the Excise Tax Calendar. 2012 e file Legal holidays. 2012 e file   Legal holidays for 2014 are listed below. 2012 e file January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. 2012 e file / Inauguration Day February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans Day November 27— Thanksgiving Day December 25— Christmas Day Statewide legal holidays. 2012 e file   A statewide legal holiday delays a due date for filing a return only if the IRS office where you are required to file is located in that state. 2012 e file A statewide legal holiday does not delay a due date for making a federal tax deposit. 2012 e file Extended due date for Forms 1098, 1099, and W-2 if filed electronically. 2012 e file   If you file Forms 1098, 1099, or W-2 electronically, your due date for filing them with the IRS or the Social Security Administration (SSA) will be extended to March 31. 2012 e file   For 2014, the due date for giving the recipient these forms is January 31. 2012 e file   For information about filing Forms 1098, 1099, or W-2G electronically, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. 2012 e file For information about filing Form W-2 electronically with the SSA, visit www. 2012 e file ssa. 2012 e file gov/employer or call 1-800-772-6270. 2012 e file Penalties. 2012 e file   Whenever possible, you should take action before the listed due date. 2012 e file If you are late, you may have to pay a penalty as well as interest on any overdue taxes. 2012 e file   Be sure to follow all the tax laws that apply to you. 2012 e file In addition to civil penalties, criminal penalties may be imposed for intentionally not paying taxes, for intentionally filing a false return, or for not filing a required return. 2012 e file Use of private delivery services. 2012 e file   You can use certain private delivery services designated by the IRS to meet the timely mailing as timely filing/paying rule for tax returns and payments. 2012 e file These private delivery services include only the following. 2012 e file DHL Express (DHL): DHL Same Day Service. 2012 e file Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2 Day, FedEx International Priority, and FedEx International First. 2012 e file United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. 2012 e file M. 2012 e file , UPS Worldwide Express Plus, and UPS Worldwide Express. 2012 e file   For the IRS mailing address to use if you are using a private delivery service, go to IRS. 2012 e file gov and enter “private delivery service” in the search box. 2012 e file   The private delivery service can tell you how to get written proof of the mailing date. 2012 e file    The U. 2012 e file S. 2012 e file Postal Service advises that private delivery services cannot deliver items to P. 2012 e file O. 2012 e file boxes. 2012 e file You must use the U. 2012 e file S. 2012 e file Postal Service to mail any item to an IRS P. 2012 e file O. 2012 e file box address. 2012 e file Prev  Up  Next   Home   More Online Publications
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The 2012 E File

2012 e file 5. 2012 e file   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. 2012 e file Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. 2012 e file When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. 2012 e file Otherwise, these are capital expenses that must be added to the basis of the land. 2012 e file (See chapter 6 for information on determining basis. 2012 e file ) Conservation expenses for land in a foreign country do not qualify for this special treatment. 2012 e file The deduction for conservation expenses cannot be more than 25% of your gross income from farming. 2012 e file See 25% Limit on Deduction , later. 2012 e file Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. 2012 e file These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. 2012 e file You must include in income most government payments for approved conservation practices. 2012 e file However, you can exclude some payments you receive under certain cost-sharing conservation programs. 2012 e file For more information, see Agricultural Program Payments in chapter 3. 2012 e file To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. 2012 e file Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. 2012 e file You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. 2012 e file You are not farming if you are engaged only in forestry or the growing of timber. 2012 e file Farm defined. 2012 e file   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. 2012 e file It also includes plantations, ranches, ranges, and orchards. 2012 e file A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. 2012 e file It does not include an area where they are merely caught or harvested. 2012 e file A plant nursery is a farm for purposes of deducting soil and water conservation expenses. 2012 e file Farm rental. 2012 e file   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. 2012 e file If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. 2012 e file   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. 2012 e file Example. 2012 e file You own a farm in Iowa and live in California. 2012 e file You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. 2012 e file You cannot deduct your soil conservation expenses for this farm. 2012 e file You must capitalize the expenses and add them to the basis of the land. 2012 e file     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. 2012 e file Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. 2012 e file If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. 2012 e file Keep a copy of the plan with your books and records to support your deductions. 2012 e file Conservation plan. 2012 e file   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. 2012 e file There are three types of approved plans. 2012 e file NRCS individual site plans. 2012 e file These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. 2012 e file NRCS county plans. 2012 e file These plans include a listing of farm conservation practices approved for the county where the farmland is located. 2012 e file You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. 2012 e file Comparable state agency plans. 2012 e file These plans are approved by state agencies and can be approved individual site plans or county plans. 2012 e file   A list of NRCS conservation programs is available at www. 2012 e file nrcs. 2012 e file usda. 2012 e file gov/programs. 2012 e file Individual site plans can be obtained from NRCS offices and the comparable state agencies. 2012 e file Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. 2012 e file These expenses include, but are not limited to, the following. 2012 e file The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. 2012 e file The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. 2012 e file The eradication of brush. 2012 e file The planting of windbreaks. 2012 e file You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. 2012 e file These expenses are added to the basis of the land. 2012 e file If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. 2012 e file See chapter 3 for information about payments eligible for the cost-sharing exclusion. 2012 e file New farm or farmland. 2012 e file   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. 2012 e file You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. 2012 e file The new farming activity does not have to be the same as the old farming activity. 2012 e file For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. 2012 e file Land not used for farming. 2012 e file   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. 2012 e file For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. 2012 e file You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. 2012 e file Depreciable conservation assets. 2012 e file   You generally cannot deduct your expenses for depreciable conservation assets. 2012 e file However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. 2012 e file See Assessment for Depreciable Property , later. 2012 e file   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. 2012 e file These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. 2012 e file You recover your capital investment through annual allowances for depreciation. 2012 e file   You can deduct soil and water conservation expenses for nondepreciable earthen items. 2012 e file Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. 2012 e file Water well. 2012 e file   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. 2012 e file It is a capital expense. 2012 e file You recover your cost through depreciation. 2012 e file You also must capitalize your cost for drilling a test hole. 2012 e file If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. 2012 e file You can recover the total cost through depreciation deductions. 2012 e file   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. 2012 e file Abandonment means that all economic benefits from the well are terminated. 2012 e file For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. 2012 e file Endangered species recovery expenses. 2012 e file   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. 2012 e file Otherwise, these are capital expenses that must be added to the basis of the land. 2012 e file   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. 2012 e file See Internal Revenue Code section 175 for more information. 2012 e file Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. 2012 e file You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. 2012 e file Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. 2012 e file This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. 2012 e file The depreciable property must be used in the district's soil and water conservation activities. 2012 e file However, the following limits apply to these assessments. 2012 e file The total assessment limit. 2012 e file The yearly assessment limit. 2012 e file After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. 2012 e file The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. 2012 e file See Table 5-1 for a brief summary of these limits. 2012 e file Table 5-1. 2012 e file Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. 2012 e file Your deductible share of the cost to the district for the property. 2012 e file Your gross income from farming. 2012 e file No one taxpayer can deduct more than 10% of the total assessment. 2012 e file Any amount over 10% is a capital expense and is added to the basis of your land. 2012 e file If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 2012 e file If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. 2012 e file You can deduct the remainder in equal amounts over the next 9 tax years. 2012 e file Limit for all conservation expenses, including assessments for depreciable property. 2012 e file Amounts greater than 25% can be carried to the following year and added to that year's expenses. 2012 e file The total is then subject to the 25% of gross income from farming limit in that year. 2012 e file To ensure your deduction is within the deduction limits, keep records to show the following. 2012 e file The total assessment against all members of the district for the depreciable property. 2012 e file Your deductible share of the cost to the district for the depreciable property. 2012 e file Your gross income from farming. 2012 e file Total assessment limit. 2012 e file   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. 2012 e file This applies whether you pay the assessment in one payment or in installments. 2012 e file If your assessment is more than 10% of the total amount assessed, both the following rules apply. 2012 e file The amount over 10% is a capital expense and is added to the basis of your land. 2012 e file If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 2012 e file Yearly assessment limit. 2012 e file   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. 2012 e file If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. 2012 e file If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. 2012 e file You can deduct the remainder in equal amounts over the next 9 tax years. 2012 e file Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. 2012 e file Example 1. 2012 e file This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. 2012 e file Of the assessment, $1,500 is for digging drainage ditches. 2012 e file You can deduct this part as a soil or conservation expense as if you had paid it directly. 2012 e file The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. 2012 e file The total amount assessed by the district against all its members for the depreciable equipment is $7,000. 2012 e file The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. 2012 e file The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. 2012 e file To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. 2012 e file Add $500 to the result for a total of $570. 2012 e file Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). 2012 e file You can deduct the balance at the rate of $70 a year over the next 9 years. 2012 e file You add $70 to the $1,500 portion of the assessment for drainage ditches. 2012 e file You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. 2012 e file Example 2. 2012 e file Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. 2012 e file The total amount assessed by the district against all its members for depreciable equipment is $5,500. 2012 e file The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. 2012 e file The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). 2012 e file Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. 2012 e file You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. 2012 e file Sale or other disposal of land during 9-year period. 2012 e file   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. 2012 e file Death of farmer during 9-year period. 2012 e file   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. 2012 e file 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. 2012 e file Gross income from farming. 2012 e file   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. 2012 e file Gains from sales of draft, breeding, or dairy livestock are included. 2012 e file Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. 2012 e file Carryover of deduction. 2012 e file   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. 2012 e file However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. 2012 e file Example. 2012 e file In 2012, you have gross income of $32,000 from two farms. 2012 e file During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. 2012 e file However, your deduction is limited to 25% of $32,000, or $8,000. 2012 e file The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. 2012 e file The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. 2012 e file Any expenses over the limit in that year are carried to 2014 and later years. 2012 e file Net operating loss. 2012 e file   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. 2012 e file If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. 2012 e file When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. 2012 e file If you do not choose to deduct the expenses, you must capitalize them. 2012 e file Change of method. 2012 e file   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. 2012 e file To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. 2012 e file You or your authorized representative must sign the request. 2012 e file   The request must include the following information. 2012 e file Your name and address. 2012 e file The first tax year the method or change of method is to apply. 2012 e file Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. 2012 e file If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. 2012 e file The total expenses you paid or incurred in the first tax year the method or change of method is to apply. 2012 e file A statement that you will account separately in your books for the expenses to which this method or change of method relates. 2012 e file Send your request to the following  address. 2012 e file  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. 2012 e file Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). 2012 e file However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. 2012 e file Gain on sale of farmland. 2012 e file   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. 2012 e file If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. 2012 e file See Section 1252 property under Other Gains in chapter 9. 2012 e file Prev  Up  Next   Home   More Online Publications