Water wells used to provide water for raising poultry and livestock are land improvements. However, land preparation costs for center pivot irrigation systems are not depreciable. In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Too often, well designs are focused only on limiting the capital cost of the well installation without regard to the operational expenses occurring during future years of the well’s use. You can depreciate irrigation systems and wells composed of masonry, concrete, tile (including drainage tile), metal, or wood. The design of a water well should reflect a consideration of its cost during the entire life of the well, typically from 25 to more than 100 years. Digging a shallow well costs 1,800 and 3,000.Costs depend on the depth drilled, soil conditions, and the wells diameter. Most homeowners spend 3,750 to 15,300, or 25 to 65 per foot for well installation. Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Drilling a well costs 5,325 to 9,180 for an average depth of 150 feet.
For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. Abandonment means that all economic benefits from the well are terminated. If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. You can recover the total cost through depreciation deductions. If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well.
You also must capitalize your cost for drilling a test hole. You recover your cost through depreciation. You can't deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. Yes, assuming that the well was drilled for "business" purposes, not "personal" purposes.