Farm Expense Property Details
Farmers and agricultural business owners must track and report various expenses related to their farming operations. These expenses are deductible if they are ordinary and necessary for the operation of the farm business. The IRS provides guidance on what qualifies as a deductible farm expense through Publication 225, which is specifically designed for farmers.
Key Deductible Farm Expenses
- Repairs and Improvements: Routine repairs to farm equipment, buildings, and land are deductible. Major improvements that extend the useful life of property may be capitalized and depreciated over time.
- Real Estate Taxes: Property taxes paid on land used for farming are deductible as a business expense.
- Feed Assistance: Costs related to animal feed and supplements are deductible if used in the farming operation.
- Rented Property Improvements: If you rent farm land or equipment, improvements made to rented property may be deductible under certain conditions.
- Section 179 Expense Deduction: Farmers can elect to deduct the cost of qualifying equipment and property under Section 179, subject to annual limits.
Non-Deductible Expenses
Certain expenses are not deductible, including personal expenses, fines, penalties, and capital expenditures that are not depreciated. Capital expenses, such as purchasing new farm machinery or buildings, must be depreciated over time rather than deducted in full in the year of purchase.
Reporting Farm Expenses
Farmers report their income and expenses using Form 4835, Farm Rental Income and Expenses. This form is used to calculate net farm income or loss and is attached to Form 1040. The form includes sections for rental income, operating expenses, and capital expenses.
When filing electronically through Online Taxes (OLT) software, users can add Form 4835 by navigating to the Federal section, selecting "Show more" under Rental, Royalty, Partnership, S Corp, Trust, and then choosing "Add or Edit" next to Farm Rental Income and Expenses.
Useful IRS Publications
- Publication 225 (Farmer’s Tax Guide): Comprehensive guide covering farm income, expenses, depreciation, and more.
- Publication 544 (Sales and Other Dispositions of Assets): Details on how to report sales of farm assets.
- Publication 551 (Basis of Assets): Explains how to determine the basis of farm property for tax purposes.
- Publication 463 (Travel, Gift, and Car Expenses): Guidance on deducting travel and vehicle expenses related to farming.
Source:
Publication 225 (Farmer’s Tax Guide)
Publication 544 (Sales and Other Dispositions of Assets)
Publication 551 (Basis of Assets)
Publication 463 (Travel, Gift, and Car Expenses)
Note: Always verify details with current Federal or State Department of Revenue Forms and Instructions.