Top Tax Deductions Every Farmer Should Know About in 2026
How Iowa Farmers Can Keep More of What They Earn
Growing up in Carroll, Iowa, I learned early on that farming isn't just a business—it's a way of life. The long hours, unpredictable weather, rising input costs, and volatile commodity prices mean every dollar matters.
As a CPA who works with agricultural businesses, one of the biggest mistakes I see is farmers leaving thousands of dollars in legitimate tax deductions on the table simply because they didn't know they qualified.
Whether you operate a family farm that's been passed down for generations or you're expanding your operation, proactive tax planning can significantly reduce your tax bill.
Here are some of the most valuable deductions every farmer should know about.
1. Legacy Nutrient Deduction
One of the newest opportunities available to qualifying producers is the Legacy Nutrient Deduction.
As a partnered CPA with BOA Safra Ag, I've had the opportunity to help producers evaluate whether this deduction fits into their overall tax strategy.
Depending on eligibility and participation requirements, producers may receive significant tax benefits while supporting nutrient stewardship and sustainability initiatives.
This isn't a deduction that's right for every operation—which is exactly why it should be reviewed with a CPA before implementation.
The goal isn't simply lowering taxes this year.
The goal is building a tax strategy that benefits your farm for years to come.
2. Section 179 Equipment Deduction
Farm equipment is expensive.
Fortunately, the IRS allows many purchases to be deducted immediately instead of depreciated over several years.
Examples include:
Tractors
Combines
Planters
Grain carts
Utility vehicles
Livestock equipment
Grain handling equipment
Timing these purchases correctly can dramatically reduce taxable income.
3. Bonus Depreciation
Even if equipment doesn't qualify under Section 179, bonus depreciation may still provide significant first-year deductions.
Your CPA can help determine which method produces the greatest tax benefit.
4. Seed, Fertilizer & Chemical Expenses
Many producers overlook opportunities to properly deduct:
Seed
Fertilizer
Herbicides
Fungicides
Insecticides
Soil amendments
Keeping organized invoices throughout the year is critical.
5. Fuel & Machinery Repairs
Fuel is one of the largest operating expenses on most farms.
Don't forget deductions for:
Diesel
Gasoline
Oil
Hydraulic fluid
Repairs
Tires
Welding
Machine maintenance
6. Farm Buildings & Improvements
Many farm improvements qualify for depreciation, including:
Machine sheds
Grain bins
Livestock buildings
Fencing
Drainage improvements
Water systems
Planning these improvements around taxable income can create meaningful savings.
7. Livestock Expenses
Livestock producers often qualify to deduct:
Feed
Veterinary expenses
Breeding costs
Bedding
Minerals
Hauling
Supplies
Maintaining detailed records is essential.
8. Crop Insurance & Farm Insurance
Premiums paid for:
Crop insurance
Property insurance
Liability insurance
Equipment insurance
Farm umbrella policies
are generally deductible business expenses.
9. Interest Expense
Many producers finance:
Equipment
Land
Operating lines
Livestock
Buildings
Interest paid on legitimate business debt is generally deductible.
10. Farm Vehicles & Mileage
If a vehicle is used for business purposes, related expenses may qualify.
Examples include:
Pickups
Service trucks
ATVs
UTVs
Documentation remains the key.
11. Employee Wages
Payroll expenses including:
Wages
Payroll taxes
Workers' compensation
Employee benefits
are generally deductible.
12. Retirement Contributions
Many farmers overlook retirement planning.
Options such as:
SEP IRA
Solo 401(k)
SIMPLE IRA
may provide both retirement savings and tax deductions.
Why Tax Planning Matters More Than Tax Preparation
Many farmers only meet with their CPA after the year has ended.
By then, most tax-saving opportunities have already passed.
The best tax savings happen throughout the year—not in March or April.
Proactive planning allows us to evaluate equipment purchases, depreciation strategies, nutrient deduction opportunities, retirement contributions, entity structure, and cash flow before year-end.
Working With Farmers Is Personal to Me
I grew up in Carroll, Iowa, where agriculture is the backbone of our community. I understand that every decision on the farm affects families, employees, and future generations.
That's why my goal isn't just preparing tax returns—it's helping producers build stronger, more profitable operations through proactive tax planning.
As a partnered CPA with BOA Safra Ag, I'm proud to help qualifying producers evaluate opportunities like the Legacy Nutrient Deduction alongside every other available tax strategy.
No two farms are alike, and your tax plan shouldn't be either.
Let's Build Your Farm's Tax Strategy
Whether you're looking at equipment purchases, entity planning, depreciation, or the Legacy Nutrient Deduction, now is the time to start planning.
At Knobbe & Associates, CPA, we work with farmers across Iowa to reduce taxes, improve profitability, and make informed financial decisions throughout the year—not just during tax season.
Schedule a consultation today and let's discuss how we can help your operation keep more of what you earn.
