Farm Income Expense - Custom Hire (Machine Work)
Custom hire services, such as machine work (e.g., plowing, planting, harvesting) performed on a farm, are considered a business expense if the farm is operated for profit. These expenses are deductible on your federal tax return, provided they are ordinary and necessary for your farming operations.
Reporting Farm Income and Expenses
- Report farm income and expenses using Schedule F (Form 1040), Profit or Loss From Farming.
- Custom hire expenses are typically listed under "Other Expenses" or a similar category on Schedule F.
- Ensure you maintain records of payments made to custom hire operators, including invoices or contracts, to substantiate the deduction.
Eligibility and Deduction Rules
- Only expenses incurred for services directly related to farming operations are deductible.
- Payments to custom hire operators must be for services performed on your farm or land used in farming.
- These expenses reduce your net farm profit, which is reported on Form 1040, line 12 (if using Schedule F).
Additional Resources
For detailed guidance on reporting farm income and expenses, refer to IRS publications and forms:
- Publication 225 (Farmer’s Tax Guide) provides comprehensive information on farm-related deductions and reporting requirements.
- Form 1040 (U.S. Individual Income Tax Return) and its attached Schedule F are used to report farm income and expenses.
Source:
Publication 225 (Farmer’s Tax Guide)
Form 1040-SS Instructions
Disclaimer: Always verify details with the official IRS forms and instructions or consult with a tax professional. The information provided is based on retrieved context and may not reflect all current tax law changes.