Farm Income Expense - Custom Hire (machine work)

Custom hire (machine work) income and expenses are specific to farm operations and are reported on Schedule F (Form 1040) for farmers who engage in contract farming services. Income received for performing custom work—such as plowing, harvesting, or other machine-based services—off your own farm for others must be reported as farm income. This includes payments received in cash, services, or merchandise, regardless of whether income tax was withheld. The income is reported on Line 7 of Schedule F if it is incidental to your farming business. However, if the custom work activities are more than incidental, you must report the income and related expenses on Schedule C instead.

Reporting Custom Hire Income

• Line 7 (Schedule F): Report income from custom hire (machine work) if the activity is incidental to your farming business.
• Line 42 (Schedule F): This line is designated for custom hire (machine work) income in some versions of the form, indicating a possible update or variation in form layout.
• Form 1099-MISC: If you receive a Form 1099-MISC for custom farming work, include the amount on Line 7 of Schedule F.

Reporting Custom Hire Expenses

• Line 13 (Schedule F): Enter amounts paid for custom hire or machine work where the machine operator furnished the equipment. This is a deductible farm expense.
• Exclusions: Do not include amounts paid for rental or lease of equipment that you operated yourself. Those amounts should be reported on Line 24a of Schedule F.

Additional Considerations

• Self-Employment Tax: Income from custom hire (machine work) is subject to self-employment tax if it constitutes a trade or business. You cannot deduct self-employment tax as a farm business expense, but you may deduct half of it as an adjustment to income on Schedule 1 (Form 1040), Line 15.
• Employment Credits: Reduce your deduction for wages by any employment credits claimed, such as the Work Opportunity Credit (Form 5884).
• Nondeductible Expenses: Wages paid for household work (e.g., home repairs or maintenance) are not deductible, even if the worker is employed on the farm. Only wages for caring for farm laborers are deductible.

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Disclaimer: Always verify details with the current year’s Federal or State Department of Revenue Forms and Instructions. For complex tax situations, consult a CPA or tax attorney.