Depreciation on Inherited Asset

[spowens]

I inherited agricultural farmland in 2023.  It is irrigated farmland so there is a pivot, motor and well on the property for watering the crops.  I charge a fixed cash rent to the tenant.  My first rental income was received on 1/4/2024 so will be filed on my 2024 tax return.  I understand since the irrigation equipment was inherited I am unable to use Section 179 or bonus depreciation.  My question is even though I inherited the irrigation equipment in 2023 can I wait and report it for depreciation purposes beginning in 2024 when I have income from the property or do I need to enter the equipment on my 2023 tax return?

[PatriciaV]

It depends. Was the farmland rented by the tenant in 2023? Was the farm being irrigated? If there was any sort of activity for this property, you should include this on your 2023 tax return. This would be a Farm Income, which is reported on Schedule F.

But if you inherited the property and left it fallow (no activity at all), you can wait to include the farm rental on your 2024 return.

Additional Information:

• IRS Farmer's Tax Guide 
• What is Form 4835: Farm Rental Income and Expenses