Section 180, Reporting Barter With Form 1099, and Other Farm Tax Rules

Businesses that earn farming income are usually entitled to a slew of tax benefits like farming-specific tax deductions. But the farm tax code also contains many obscure rules and exceptions that can be easy for business owners to miss.

To help, we reviewed three lesser-known tax rules with Shannon Sand, an agricultural economist and educator at the University of Nebraska-Lincoln who regularly writes about farm tax rules for the Center for Agricultural Profitability’s website.

1. The Section 180 deduction for surplus fertilizer in newly-purchased farmland

If you recently purchased farmland, you might be able to deduct the value of any excess fertilizer present in that land, which can range into the thousands of dollars per acre depending on how much fertilizer is actually present in the soil.

The deduction is called Section 180, and Sand says that one telltale sign that your land might be eligible is if you purchased it at a premium, which could indicate a higher-than-baseline amount of fertility in the soil. As Sand explains, however, the Section 180 calculation is complicated and requires a team of experts to file for properly.

“You definitely need to talk to your accountant. You also need to talk to a certified agronomist, because it has to be them that calculates how much excess or residual fertility is in the ground.”

To take the Section 180 deduction, the soil must first be tested via extensive grid sampling, and samples must be collected in the year that the land is purchased, which is when Sand recommends business owners file for the deduction. Section 180 also doesn’t apply to land that hasn’t previously been used for farming, or to land that was previously rented.

If you think your land might be eligible, Sand recommends reaching out to your local agronomist or to a farm accounting practice specializing in Section 180 deductions for a consultation.

2. Report payments of $600 or more for rent, services or interest using Form 1099

Any payments of $600 or more in the calendar year to an individual, LLC, partnership, or trust must be reported to the IRS using one of the 1099 forms. The 1099-NEC applies to payments to non-employees or independent contractors, and is particularly important for farmers who rely on non-employees to keep their businesses running.

“I had a friend who recently had to rebuild a fence for their cattle, and they have a really good accountant who’s going to take care of that for them. But a lot of smaller operations tend to do their own bookkeeping, so it’s really important to make sure you get those filled out on time, because there’s a pretty steep penalty if those aren’t sent out,” says Sand.

A copy of 1099-NEC must be sent to payees by January 31st. For 1099 forms filed in 2025, there’s a $60 late penalty per form if you file within 30 days of the deadline, which goes up to $130 if you’re more than 100 days late, $330 if you file after August 1st, and $660 if you intentionally fail to file. If you fail to file and the income goes unreported, the payee could also be subject to a penalty equal to 20% of the unreported income.

Payments of $600 or more in rents, royalties, and other income payments go on Form 1099-MISC, which Sand calls “the MISC.”

3. Report barter exchanges using Form 1099-B

You might already have known about Form 1099. But did you know Form 1099-B covers barter exchanges of property or services as well?

“Operations will often do bartering or trade for services–and you have to do a 1099 for those as well. And I know those aren’t things people think about,” points out Sand, who spoke at length about Form 1099 and its implications for farmers in a recent episode of the Nebraska FARMcast.

“It’s important to make sure everything’s accounted for appropriately. A 20% tax penalty is pretty big in my mind.”

1099-NEC deadlines for 2025:

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