Farm Rental Income refers to income received by a landowner (or sub-lessee) from renting out farmland or agricultural property under a crop-share or livestock-share arrangement. Instead of receiving a fixed cash payment, the landowner receives a share of the agricultural production (such as crops or livestock), or the cash equivalent of that share.
This type of income is reported on Form 4835, Farm Rental Income and Expenses, when the landowner does not materially participate in the farming operations.
Key Features of Farm Rental Income
- Production-Based Income:
Income comes from a share of crops, livestock, or other agricultural output—not fixed cash rent.
- Form Used:
Reported on Form 4835 (Farm Rental Income and Expenses) when the landowner does not materially participate in farming.
- Material Participation Matters:
- No material participation → Report on Form 4835; not subject to self-employment tax
- Material participation → Report on Schedule F; subject to self-employment tax
- Cash Rent vs Crop Share:
- Crop-share rent → Form 4835
- Cash rent (fixed payments) → Schedule E (not Form 4835)
- Expenses Allowed:
Landowners can deduct expenses like property taxes, insurance, and maintenance to determine net income or loss.
When to Use Form 4835
- You are a landowner or sub-lessor
- You receive crop or livestock shares (not fixed rent)
- You do not materially participate in farming operations
Reporting Requirements
- Farm rental income arises from production-based rental arrangements where the landowner receives a share of farm output rather than fixed rent. When the landowner does not materially participate, the income is reported on Form 4835, flows to Schedule E, and is not subject to self-employment tax. If the landowner materially participates, the activity is treated as a farming business and reported on Schedule F, making it subject to self-employment tax.
Source:
Form 4835 Instructions (2025)
Disclaimer: Always verify details with the current year’s IRS forms and instructions from the Federal or State Department of Revenue. Tax rules may vary based on individual circumstances and jurisdiction.