Form 4835 - Farm Rental Income and Expenses

Form 4835 - Farm Rental Income and Expenses

Form 4835 is used by landowners (or sub-lessors) who rent out farmland or farm operations based on a share of crops or livestock produced by the tenant. This form is specifically designed for reporting farm rental income and expenses when the landowner does not materially participate in the farm’s operation or management.

Who Should Use Form 4835?

• Landowners or sub-lessors who do not materially participate in the farm’s operation or management.
• Individuals who receive rental income based on a share of crops or livestock produced by the tenant.
• Spouses who jointly own a farm rental business and elect to be taxed as a qualified joint venture (if they did not materially participate).

Note: Do not use Form 4835 if you are a tenant, materially participated in farm operations, received cash rent for farmland, or are an estate, trust, partnership, or S corporation. In those cases, use Schedule F (Form 1040), Schedule E (Form 1040), or Form 8825 instead.

Key Reporting Rules

• Gross Rental Income (Line 1): Report income received from livestock, produce, grains, and other crops based on production. This must be reported in the year you convert it into money or its equivalent.
• Expenses (Lines 8–30f): Report all farm rental expenses. Do not reduce these expenses by capitalized costs. Instead, enter capitalized expenses in parentheses on line 30g and label it “263A.”
• Net Farm Rental Income (Line 32): Subtract total expenses (line 31) from gross income (line 7). If line 7 exceeds line 31 and you have prior year unallowed passive activity losses, use Form 8582 to determine how much of those losses can be claimed.
• Passive Activity Losses: If you have a net loss, you may need to complete Form 8582 to determine deductible loss. If you checked box 34b, you must also complete Form 6198 before completing Form 8582.

Special Considerations

• Qualified Joint Ventures: Spouses who jointly own a farm rental business and materially participate may elect to be taxed as a qualified joint venture. This allows each spouse to claim credit for social security and Medicare earnings.
• Depreciation and Section 179 Deduction (Line 12): Report depreciation and Section 179 expense deductions. Refer to Chapter 7 of Publication 225 and Form 4562 instructions for details.
• Interest Expense: Interest must be properly allocated and classified. Refer to Schedule F (Form 1040) lines 21a and 21b for guidance.

Additional Resources

For more information on farm rental income, material participation, and passive activity loss rules, refer to:

• Pub. 225, Farmer’s Tax Guide (for definitions and detailed guidance)
• Instructions for Schedule F (Form 1040) and Schedule E (Form 1040)
• Instructions for Form 8582 (Passive Activity Loss Limitations)

Source:

Form 4835 - Farm Rental Income and Expenses

Publication 225 - Farmer’s Tax Guide

Form 8582 - Passive Activity Loss Limitations

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