Farm Income Expense for Utilities

Farm Income and Expense for Utilities

Farmers and agricultural producers may deduct expenses related to utilities used in the operation of their farm business. These expenses are typically reported on Form 4835 - Farm Rental Income and Expenses, which is used to report income and expenses from farm rental activities. Utilities such as electricity, water, gas, and other services necessary for farm operations may be deductible if they are directly related to the business use of the farm property.

Key Points for Deducting Utility Expenses

• Business Use Requirement: Only utilities used for business purposes (e.g., operating farm equipment, irrigation, lighting barns, or maintaining storage facilities) are deductible.
• Recordkeeping: Maintain detailed records of utility bills and usage to substantiate the business portion of expenses.
• Allocation: If utilities are used for both personal and business purposes, you must allocate expenses based on usage. For example, if 70% of electricity is used for farming operations, 70% of the bill may be deductible.
• Reporting: Report deductible utility expenses on Form 4835, which is attached to your Form 1040. This form helps calculate net farm income or loss.

How to Add Form 4835 in OLT Software

To include Form 4835 in your tax return using OLT (Online Taxes) software:

1. Open your tax return in the software.
2. In the left menu (or tap the three dots on mobile), select Federal.
3. Under the Income section, click Show more near "Rental, Royalty, Partnership, S Corp, Trust."
4. Click Add or Edit next to "Farm Rental Income and Expenses - Form 4835."
5. Follow the on-screen instructions to enter utility and other farm-related expenses.

Note: For detailed guidance on farm income and expenses, refer to IRS Publication 225 (Farmer’s Tax Guide), which includes information on allowable deductions, including utilities.

Source:
Farmer’s Tax Guide (Publication 225)
Instructions for Form 5329

Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.