When to Deduct or Capitalize(p30)

If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. If you do not choose to deduct the expenses, you must capitalize them.

If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. You or your authorized representative must sign the request.

The request must include the following information.

• Your name and address.
• The first tax year the method or change of method is to apply.
• Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply.
• The total expenses you paid or incurred in the first tax year the method or change of method is to apply.
• A statement that you will account separately in your books for the expenses to which this method or change of method relates.

 For more information, see Change in
Accounting Method in chapter 2.