With the ink barely dry on the regulations governing Alabama’s new irrigation tax incentive, the best advice is to check with your accountant or tax preparer before claiming it.

“If you think you’re going to qualify for this credit, you really need to meet with your tax preparer and do what is best for your specific situation,” says Jamie Yeager, field economist with the Alabama Farm Analysis Association.

Yeager discussed the new tax credit during the recent Alabama Irrigation Summit, held in Montgomery.

 (See: Alabama farmers to receive tax incentive for installing irrigation).

“I don’t think they’ve finished writing the regulations on this yet, so some of this may change. But the Alabama Department of Revenue was fairly final on most everything,” said Yeager on Aug. 15.

In its most recent session, the Alabama Legislature passed the Irrigation Incentives Bill, which provides a state income tax credit of 20 percent of the costs of the purchase and installation of irrigation systems.

The bill also allows the tax credit on the development of irrigation reservoirs and water wells, in addition to the conversion of fuel-powered systems to electric power.

The one-time credit cannot exceed $10,000 per taxpayer, and it must be taken in the year in which the equipment or reservoirs are placed into service.

The credit is good, says Yeager, for all tax years beginning after Dec. 31, 2011, or for 2012 and beyond.

Any agricultural trade or business shall be allowed an income tax credit of 20 percent of the cost of the purchase and installation of any qualified irrigation equipment, or any conversion cost related to the conversion of fuel to electricity or qualified reservoirs, he says.

“This tax credit is for state of Alabama income tax only. It has no effect on federal income tax or self-employment tax. When I sit down with farmers in the fall to do their tax preparation, generally, the tax we’re most concerned with is federal income tax and self-employment tax because that’s where you can make the most headway with any tax problem.