Frequently Asked Questions

It’s a tax deduction the IRS allows when groundwater under your land is permanently depleted. Think of it like depreciation: just like a tractor wears out over time, water that disappears has value you can deduct, if properly documented.

The deduction is grounded in Internal Revenue Code §611, which allows for cost depletion of natural resources, including groundwater, when the quantity is known and exhaustible. This provision is typically used in industries like oil, gas, and mining — but also applies to groundwater used in agriculture.

The IRS confirmed this in Revenue Ruling 82-214, which specifically allows groundwater depletion deductions for landowners using groundwater for irrigation. The deduction must be based on a reasonable estimate of the recoverable quantity and the owner’s cost basis.

Additional support comes from:

• IRC §612 – which explains how to determine the taxpayer’s basis in natural resources.
• IRC §1016(a)(1) – which governs how deductions adjust basis over time.
• The IRS also reaffirms this deduction in Publication 225 (Farmer’s Tax Guide), most recently in the 2024 edition.

We reference all of these authorities in our white paper and in the CPA documentation we provide with each report.

If you irrigate over the Ogallala Aquifer (or other groundwater that’s known to be depleting) and have owned the land for a while, there’s a good chance you qualify. We’ll help you figure that out with a free initial review.

We estimate how much groundwater was under your land when you bought it, how much is left today, and assign a value to the depleted portion. This involves looking at local well data, land maps, and other public records. Then we use IRS-accepted cost depletion methods to back it up.

If you’ve never claimed this before, you may be able to “catch up” all at once using IRS Form 3115, which covers prior years, back to when you initially acquired your land. This is a special method change filing your CPA would submit. We give them everything they need to do it correctly.

Just the basics: when you bought the land, how much you paid for it, where it’s located, if you’ve taken land improvement or fertility deductions in the past, and whether you irrigate. From there, we can handle the rest — including pulling water level measurements, historical well records, aquifer data, bedrock analysis, parcel boundaries, and other relevant land and irrigation details.

If you’d like to get started, feel free to send us your intake form here.

Once we get your info, we can usually complete the analysis and provide the supporting documentation in 3–4 weeks, though we do offer rush pricing upon request. If your CPA has questions, we’re available to walk them through the numbers.

Any irrigated farmland sitting over depleting groundwater could qualify. It’s most common over the Ogallala Aquifer in Kansas and Nebraska, as well as parts of South Dakota, Wyoming, Colorado, Oklahoma, New Mexico, and Texas.

No — this deduction is specifically tied to the loss of groundwater used for irrigation. If your land is dryland or hasn’t been irrigated, the IRS doesn’t recognize groundwater depletion as a basis for a deduction. That said, if you used to irrigate the land but no longer do because of declining water levels, you may still qualify for past years. We can help you evaluate that.

Generally, no. The groundwater depletion deduction applies to the owner of the land, not the operator or tenant. However, if you’re in a long-term lease with certain legal structures (like a crop-share where you bear economic risk), there may be exceptions. We recommend checking with your CPA.

Make sure to check with your CPA on this. However, generally, you can still claim the deduction — but only for your share. If the land is held in a trust, partnership, or LLC, your portion of the deduction would flow through based on ownership percentage. We’ll prepare the report at the parcel level.

Check with your CPA, but the answer is typically yes. If the deduction is larger than your income in a given year, your CPA may be able to carry forward the unused portion, just like with other tax attributes. This can be especially helpful for farmers in low-income years or those transitioning to retirement. Your CPA can guide you on the specific mechanics, and we’ll provide all the numbers they need.

While this deduction isn’t widely known, we’ve put together a white paper to help walk CPAs through the relevant IRS guidance. We can also provide references to IRS documentation and examples to support the filing process. We will make sure your CPA has the context they need to file this properly.

For a new claim, it’s usually added to your return like other deductions. But if you’re catching up on past years, your CPA may need to file IRS Form 3115 (Change in Accounting Method).

You get:

• A custom depletion report
• Parcel-level valuation
• Scientific backup
• IRS-ready documentation
• Support for your CPA or attorney

As with any tax deduction, the key is good documentation. That’s where we come in. We provide a defensible, well-documented approach that follows IRS standards and references the relevant rulings and revenue procedures.

Yes. If the IRS ever questions the deduction, we’ll back up our analysis and walk your CPA or attorney through the numbers and rationale. We've designed our process to stand up to scrutiny from day one.

Our pricing is based on the value we help you uncover. If this is your first report, or you're not enrolled in annual monitoring, the report cost is the lesser of:

• 7.5% of the total deduction amount, or
• $10 per acre per year (based on the years covered in the report)

If you then enroll in the monitoring program after your first report, you qualify for discounted pricing for future reports:

• 5% of the total deduction, or
• $7.50 per acre per year

In both cases, we’ll only proceed with the report if you sign off and there’s a clear deduction opportunity.

For simplicity, let’s say your land qualifies for a $100 per acre deduction (though for multiple years, it can be much higher than this):

• Your tax savings (at a 35% tax rate) = $35 per acre
• Our report fee = the lesser of 7.5% of the deduction or $10/acre/year → here, $7.50 per acre
• Because the fee is tax-deductible, your real cost after tax is about $4.88/acre.

Bottom line: After taxes, you spend $4.88 to save $35 — that's over a 6x return on your investment.

Monitoring lets you stay current on aquifer conditions and qualify for discounted report pricing in future years.

Pricing:

• $250 per year for up to 1,000 acres
• +$0.25 per acre for each acre above that

Your subscription is applied as a credit toward any future valuation report.

For example, if you monitor for 3 years and then request a report, your fees from all 3 years reduce what you owe — and you’re eligible for the 5% / $7.50 per acre pricing tier.

Your annual monitoring fees accumulate as credit. If you stay continuously enrolled, those deposits apply directly to the cost of your next depletion valuation.

Important: If you pause or cancel monitoring, your deposits are forfeited — and future reports are charged at the standard (7.5% / $10) rate.

Our pricing model is designed to reflect the value of the deduction — and ensure you get a strong return on investment.

By tying fees to the size of your deduction, and capping it with a per-acre rate, we keep pricing predictable and transparent.

The monitoring program helps you build credit while qualifying for discounted pricing, so you’re never overpaying for a deduction you’ve already earned.

We look at well logs, USGS data, and state groundwater records to calculate how much the aquifer has declined under your land. We use Inverse Distance Weighting (IDW) — a scientifically accepted method — to calculate depletion.

We pull from federal, state, and local well records, along with GIS and remote sensing data. Our reports reference scientific methods and IRS-approved depletion approaches. Everything is backed by clear sources your CPA can verify.

Absolutely. We’re here to support your team. We provide technical memos and documentation that make it easy for them to file the deduction properly.

Yes, that’s a core part of what we do. Every project includes detailed valuation documentation, maps, data references, and IRS citations. If your accountant wants to dig into the technical side, we’re happy to help.

You’re not alone — most CPAs haven’t come across this deduction because it’s rarely been applied in agriculture, even though it’s been around for decades. It’s more commonly used in oil, gas, and mining. Our job is to bridge that gap by combining science with tax law, so your CPA has the tools and documentation to file it properly.

Just fill out the “Contact Us” form on our website. We’ll take a quick look at your land and let you know if it’s worth digging deeper — with no obligation.

Yes. We’ll take a look at your land location, water history, and ownership timeline at no cost.