Form 4835 - Crop Insurance Proceeds

Form 4835 - Crop Insurance Proceeds

Form 4835, titled "Farm Rental Income and Expenses," is used by landowners (or sub-lessors) who do not materially participate in the operation or management of a farm to report rental income based on crops or livestock produced by tenants. This form is specifically designed for rental activities subject to passive activity loss limitations.

Reporting Crop Insurance Proceeds

• General Rule: Crop insurance proceeds, including federal crop disaster payments, must generally be reported in the year they are received.
• Deferral Election: If you use the cash method of accounting and the year of damage was 2024, you may elect to defer reporting certain proceeds until 2025. To do this, check the box on line 5c of Form 4835 and attach a statement to your return.
• Complete Deferral: If you elect to defer any eligible crop insurance proceeds, you must defer all such proceeds, including federal crop disaster payments.
• Reference for Details: For detailed guidance on completing lines 5a through 5d, refer to the instructions for Schedule F (Form 1040), lines 6a through 6d.

Important Considerations

• Material Participation: If you materially participated in the farm’s operation or management, you must use Schedule F (Form 1040) instead of Form 4835.
• Landlord vs. Tenant: Tenants should use Schedule F (Form 1040) to report farm income and expenses. Landowners who receive cash rent based on a flat charge should report on Schedule E (Form 1040), Part I.
• Passive Activity Losses: If you have prior year unallowed passive activity losses from this rental activity, you must use Form 8582 to determine how much of those losses can be claimed before entering net farm rental income on line 32.

Additional Guidance

• Capitalized Expenses: Expenses that must be capitalized should not be reduced from lines 8 through 30f. Instead, enter the total capitalized amount in parentheses on line 30g and label it “263A.”
• Net Loss Reporting: If line 7 (total income) is greater than line 31 (total expenses), and you have no prior year unallowed passive activity losses, subtract line 31 from line 7 to determine your net farm rental income.

Source:

Form 4835 - Farm Rental Income and Expenses

Form 8582 - Passive Activity Loss Limitations

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