I cleared trees from land, improving it for agriculture. Where in Turbotax Home and Business do I enter land improvements on farm?

[ridbus]

My only question is where in Turbo Tax do I enter the capital expense of land clearing? I can see where to enter maintenance like plowing.

[Cattlerancher]

I don't see anywhere in this IRS publication 225 that refers to the clearing of trees from farm land as a capital improvement. The sale of those trees are farm income, but I believe land clearing of those trees (stump removal) is a farm expense. Similar to clearing rocks from farm land to gain more acres/yield or taxable income. So for example fuel is expensed, rental equipment is expensed, purchased equipment is depreciated. Let me know if you learn anything different.

Here's a link for you to review this Farmers Tax Guide;

https://www.irs.gov/pub/irs-pdf/p225.pdf

[ridbus]

Thanks, Cattlerancher. However pub 225 on page 24 states "Generally, the costs of the following items, including the costs of material, hired labor, and installation, are capital expenses." The 9th item begins: "9. Land preparation costs, such as: a. Clearing land for farming,"

[Cattlerancher]

Great research, you are right. I just helped someone else on a similar question about the installation of drain tile. Drain tile and agricultural fences are capitalized but with the exception that they do qualify for section 179. He wanted to know where/how use sec. 179 with land improvements in TurboTax. All other land improvements appear to be 15 year life property. So have you found where to enter land improvements in TurboTax yet?

[ridbus]

Thanks. I was told to enter it as a land improvement. I did and TurboTax amortized it which is wrong. As I read it, clearing and demolition only add to basis and can only be used to offset capital gains when property is sold.

[Cattlerancher]

Not sure on all the rules here either but I think this is right. You said you have a farm. A farm is a business with income and profits. You would be required to depreciate land improvement over 15 years.
But if you have an investment, say bare land with trees you are clearing for a potential home with no annual income, than your expenses add to your basis in the investment property.