Elected Farm Income and Definitions
Farm income can be reported in various ways depending on the taxpayer’s filing status and the nature of the farming business. One important election available to married taxpayers is the option to report farm income separately, which allows each spouse to file a separate Schedule F (Form 1040) for their share of the farming business income, deductions, and losses.
What is the Election for Separate Reporting?
- Married taxpayers may elect to report farm income separately if they file separate tax returns.
- To make this election, each spouse must file a separate Schedule F (Form 1040) and report their respective share of income, deductions, and losses from the farming business.
- Each spouse must also file a separate Schedule SE (Form 1040) to compute self-employment tax on their share of farm income.
How to Make the Election
- Divide all items of income, gain, loss, deduction, and credit attributable to the farming business between spouses according to their respective interests in the venture.
- Each spouse must enter their share on their own Schedule F (Form 1040).
- The election must be made consistently for all items related to the farming business.
Key Definitions
- Farm Income: Includes income from farming operations such as crop production, livestock, dairy, poultry, and other agricultural activities.
- Schedule F (Form 1040): Used to report income and expenses from farming activities. It is attached to Form 1040.
- Schedule SE (Form 1040): Used to calculate self-employment tax on farm income reported on Schedule F.
For detailed guidance on farm income reporting, including deductions for repairs, improvements, and other farm-related expenses, refer to IRS publications that cover farming operations.
Source:
Schedule F (Form 1040)
Publication 225 (Farmer's Tax Guide)
Publication 463 (Travel, Entertainment, Gift, and Car Expenses)
Disclaimer: Always verify information with official Federal or State Department of Revenue Forms and Instructions.