Farm Income Expense - Freight and Trucking

Farmers may deduct certain freight and trucking expenses related to their farming business, but specific rules apply depending on the nature of the expense and how it is used. For transportation costs incurred in purchasing livestock held for resale, these costs should not be reported as freight on Schedule F, Line 18. Instead, they must be added to the cost basis of the livestock, as per the instructions for Schedule F (Form 1040), Part II, Line 18. This ensures proper accounting under the cash method of accounting, where such costs are deducted in the year of sale.

Truck and Car Expenses

Expenses for operating a truck or car in farming operations are deductible if used for business purposes. These include gasoline, oil, repairs, insurance, license fees, and depreciation (subject to limits). Farmers may choose between two methods to deduct these expenses:

• Standard Mileage Rate: For 2025, the rate is 70 cents per mile. This applies to owned or leased vehicles used in farming. However, if five or more vehicles are used simultaneously in the business (e.g., fleet operations), the standard mileage rate cannot be used. Additionally, if a vehicle is leased and the standard mileage rate was used for the entire lease period, actual expenses cannot be claimed later.
• Actual Expenses: If using actual expenses, farmers must include the business portion of costs such as fuel, repairs, insurance, and license fees. Depreciation is reported separately on Line 14 of Schedule F, and lease payments on Line 24a.

Business Use Percentage

Farmers may claim 75% business use of a vehicle without detailed records if the vehicle is used during most of the normal business day for farming activities such as cultivating land, raising animals, or driving to feed stores. If records show more than 75% business use, a higher percentage may be claimed. The method chosen (standard mileage or actual expenses) must be consistent for the first year the vehicle is placed in service.

Reimbursements to Employees

If farmers reimburse employees for vehicle use in farming operations, these reimbursements are deductible under an accountable plan (where employees provide expense documentation). If under a nonaccountable plan, reimbursements must be reported as wages on Form W-2 and deducted as wages.

Other Deductible Expenses

Additional farm-related expenses that may be deductible include soil and water conservation costs (up to 25% of gross farm income), educational expenses for improving farming skills, farm magazines, and other operational costs. These are reported on Schedule F, Part II.

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Disclaimer: Always verify details with current Federal or State Department of Revenue Forms and Instructions. Consult a CPA or tax professional for complex situations.