Form 4835, "Farm Rental Income and Expenses," is used by landowners or sub-lessors who receive rental income based on a share of crops or livestock produced by a tenant and who did not materially participate in the operation or management of the farm. This form is used to report income and expenses from farm rental activities that are generally not subject to self-employment tax.
Material Participation and Form Selection
- Non-participating landowners: Use Form 4835 to report income based on crop-share or livestock-share rental arrangements when you did not materially participate in the farm operation or management.
- Participating landowners: If you materially participated in the farm operation or management, report the income and expenses on Schedule F (Form 1040), Profit or Loss From Farming. In this case, the activity is treated as a farming business rather than a farm rental activity.
Reporting Income on Form 4835
- Part I – Gross Farm Rental Income: Report gross farm rental income received under crop-share or livestock-share arrangements. Include the fair market value of crops, livestock, or other agricultural products received as rent, as well as cash received from the sale of your share of the production.
- Line 7: Gross farm rental income — Enter the total gross farm rental income reported in Part I.
Part II – Expenses
- Report ordinary and necessary expenses directly related to the farm rental activity. Deductible expenses may include:
- Conservation expenses
- Depreciation and section 179 expense deduction
- Insurance
- Interest
- Repairs and maintenance
- Taxes
- Utilities
- Vehicle and truck expenses
- Other ordinary and necessary farm rental expenses
Personal, living, or family expenses are not deductible.
- Line 31: Total expenses — Enter the total deductible expenses reported in Part II.
- Line 32: Net farm rental income or (loss) — Subtract total expenses from gross farm rental income. The net income or loss is generally carried to Schedule E (Form 1040), Supplemental Income and Loss, according to the applicable tax year instructions.
Passive Activity Loss Rules
- Farm rental activities reported on Form 4835 are generally subject to the passive activity loss rules.
- If you report a loss on Form 4835, you may need to complete Form 8582, Passive Activity Loss Limitations, to determine the amount of loss that can be deducted for the tax year.
- If you report net farm rental income and otherwise qualify as an eligible farmer, you may be able to use Schedule J (Form 1040), Income Averaging for Farmers and Fishermen, to calculate your tax.
Special Cases
- Cash rent for farmland: If you receive fixed cash rent rather than a share of crops or livestock, generally report the income on Schedule E (Form 1040), not Form 4835.
- Material participation: If you materially participated in the farming operation or management, report the activity on Schedule F (Form 1040) rather than Form 4835.
- Tenant farmers: Individuals operating a farming business as tenants generally report farm income and expenses on Schedule F (Form 1040).
- Material Participation Definition
- Material participation generally means being involved in the farm operation on a regular, continuous, and substantial basis. Factors considered include participation in management decisions and involvement in the production or operation of the farming activity. Taxpayers who materially participate generally report the activity as a farming business rather than a farm rental activity.
Source:
Form 4835 (2025) - Farm Rental Income and Expenses
Publication 550 - Investment Expenses
Disclaimer: Always verify details with current Federal or State Department of Revenue Forms and Instructions. For complex situations, consult a CPA or tax attorney.