Form 4835 is used by landowners (or sub-lessees) who do not materially participate in the operation or management of a farm to report farm rental income based on crops or livestock produced by the tenant. Crop insurance proceeds, including federal crop disaster payments, are treated as crop insurance proceeds for tax purposes and must generally be reported in the year they are received.
Reporting Crop Insurance Proceeds on Form 4835
- Line 5: Crop Insurance Proceeds and Federal Crop Disaster Payments – Report the total amount received on Line 5a (Amount received in 2025). If you use the cash method of accounting, you may elect to defer reporting eligible crop insurance proceeds until the year following the year the damage occurred. To do this, check the box on Line 5c and attach a statement to your return. This deferral applies to all such proceeds, including federal crop disaster payments.
- Deferral Election – If you elect to defer, you must defer all eligible crop insurance proceeds. The deferral is governed by the rules in Chapter 3 of IRS Publication 225, Farmer’s Tax Guide.
- Line 5d: Amount Deferred from Prior Year – If you deferred proceeds from a prior year (e.g., 2024), report that amount on Line 5d.
Important Notes
- Under both cash and accrual methods, livestock or crop share rentals must be reported in the year they are converted to cash or its equivalent.
- Farm rental income reported on Form 4835 is not subject to self-employment tax.
- Form 4835 is only for rental activities; if you materially participated in farm operations, you must use Schedule F (Form 1040) instead.
Source:
Form 4835 (2025) - Farm Rental Income and Expenses
Disclaimer: Always verify details with the current year’s Federal or State Department of Revenue Forms and Instructions. For complex situations, consult a CPA or tax attorney.