How to Report Farming Income or Schedule F
Reporting farming income on your federal tax return requires the use of Schedule F (Form 1040), which is specifically designed for individuals, estates, trusts, and partnerships engaged in farming activities. This form helps you report your farm’s profit or loss and is filed with Form 1040, 1040-SR, 1040-SS, 1040-NR, 1041, or 1065.
When to Use Schedule F
- Use Schedule F if you are involved in farming as a business activity.
- It is required for reporting income and expenses from farming operations, including crop production, livestock, and related activities.
- Even if you are not a full-time farmer, you must file Schedule F if your farming activity generates income or expenses.
Key Sections of Schedule F
- Part I – Farm Income (Cash Method): Report income received in cash or its fair market value (FMV) for items such as crops, livestock, and custom farming services. Income is considered “constructively received” when credited to your account or set aside for your use.
- Part II – Farm Expenses: Deduct expenses directly related to farming operations, such as seed, fertilizer, equipment, and labor.
- Part III – Farm Income (Accrual Method): If you use the accrual method, report income when it is earned or due, not when received. Inventory rules apply for animals and crops.
Reporting Specific Income Types
- Form 1099 or CCC-1099-G: If you received these forms, determine if the amounts are farm-related and report them on the appropriate line of Schedule F.
- Rents based on crop shares: If you materially participated in farm management, report these rents on line 2.
- Sales of livestock due to weather: You may elect to report income from livestock sold due to drought, flood, or other weather-related conditions in the year after the sale if your main business is farming.
- Crop insurance proceeds: Report proceeds received in 2024 and elected to include in 2025 income on line 6d.
- Bartering income or illegal federal irrigation subsidies: Report these on line 8.
Additional Forms You May Need
- Schedule SE (Form 1040): To pay self-employment tax on farm income.
- Schedule J (Form 1040): To figure tax by averaging farm income over the previous three years (may reduce tax).
- Form 461: To figure excess business loss limitations.
- Form 4797: For reporting sales or exchanges of farm property (excluding casualty or theft).
- Form 4835: For rental income based on crop or livestock shares if you did not materially participate in farm operations.
Filing Tips
- If married and filing jointly, you may elect to divide farm income and expenses between spouses. Each spouse must file a separate Schedule F and Schedule SE.
- For estates or trusts, enter the Employer Identification Number (EIN) instead of SSN on line D.
- Select the appropriate agricultural activity code from Part IV (page 2) on line B to describe your primary farming activity.
Source:
Schedule F (Form 1040) - Profit or Loss From Farming
Disclaimer: Always verify information with official Federal or State Department of Revenue Forms and Instructions before filing your tax return.