Form 4835, titled "Farm Rental Income and Expenses," is used by landowners (or sub-lessees) who receive crop or livestock shares from tenants as rental income and did not materially participate in the farm’s operation or management. This form is specifically for reporting income based on production (e.g., crops or livestock) rather than cash rent. The income reported on Form 4835 is not subject to self-employment tax.
Key Sections of Form 4835
Part I: Gross Farm Rental Income—Based on Production
- Lines 1–6 — Detail specific types of production-based income (e.g., livestock, grains, produce).
- Line 7: Gross farm rental income — Total income received from crops, livestock, grains, or produce based on production. This amount is also reported on Schedule E (Form 1040), line 42.
Part II: Expenses—Farm Rental Property
- Lines 8–30g — List deductible expenses related to the rental farm property. These include car and truck expenses (Line 8), conservation expenses (Line 10), and other specified expenses (Line 30).
- Line 31: Total expenses — Sum of lines 8 through 30g.
- Line 32: Net farm rental income or (loss) — Subtract total expenses (Line 31) from gross income (Line 7). If the result is income, report it on Schedule E (Form 1040), line 40. If it’s a loss, proceed to Line 34.
Reporting Losses and Passive Activity Rules
- If you report a net loss on Line 32, you may need to complete Form 8582 to determine deductible losses under passive activity loss rules.
- If you have net income on Line 32, your tax may be reduced by using Schedule J (Form 1040) for alternative tax calculation.
When to Use Form 4835
- Use Form 4835 only if you are a landowner or sub-lessor who did not materially participate in the farm’s operation or management.
- Do not use Form 4835 if:
- You are a tenant — use Schedule F (Form 1040).
- You materially participated in farm operations — use Schedule F (Form 1040).
- You received cash rent — report on Schedule E (Form 1040), Part I.
- You are an estate, trust, partnership, or S corporation — report on Schedule E or Form 8825.
Material Participation Definition
- Material participation includes activities such as approving new tenants, deciding rental terms, or approving capital expenditures.
- If your interest (including spouse’s) in the farm activity is less than 10% by value, you are not considered to have materially participated.
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. Tax rules may change annually. For complex situations, consult a CPA or tax attorney.