06/11/2026
Client: Hey, I have some land and a tractor, can I deduct my property taxes, diesel, and maintenance?
Me: That depends on how the land is currently being used. Is that land currently being used for an active farming business?
Client: Well, not right now, but I’m hoping to get someone to put a crop in over the coming years.
Me: I understand the goal, but for the IRS to view those costs as business deductions, we need to show that you are engaged in an active business for profit. Do you currently earn income using that tractor?
Client: Not really. I might help a neighbor if they need me to till their garden, but that’s about it.
Me: I appreciate you sharing that. Because there isn't currently an active business generating income, those costs unfortunately fall under personal expenses, which aren't deductible.
Client: But it’s technically an investment property.
Me: I hear you, but without that active income stream, the tax code doesn't provide a way to write off those operational expenses.
Client: Well, my buddy at work writes off all their equipment.
Me: I know it can be confusing when you see others doing things differently. However, everyone's tax situation is unique; if they are being audited, they would need to prove that they are meeting the "profit motive" test that the IRS requires. My goal is to make sure we keep you protected and compliant so that you don't run into issues down the road.
*this is a fictitious conversation used for informational purposes only*
