Farm Income Tax Implications

 

The IRS considers you to be in the business of farming if both of these apply:

  • You cultivate, operate, or manage a farm.
  • Your goal is to make a profit or gain as either the owner or a tenant.

Farming includes:

  • Cultivating land
  • Operating:
    • Dairy farms
    • Fruit farms
    • Nurseries
    • Orchards
    • Poultry farms
    • Fish farms
    • Plantations
    • Ranches
    • Stock farms
    • Truck farms
  • Selling crop shares
  • Breeding and raising fur-bearing animals that aren’t dogs, cats, or other pets

Farm income includes:

  • Money
  • Fair market value (FMV) of property or services received for gain or profit from:
    • Cultivating a farm
    • Operating a farm
    • Managing a farm
  • Gain on selling farm products raised for sale or bought for resale.

You use Schedule F (not Schedule C) to figure the profit or loss of your farm.

You’re usually self-employed if you operate your own farm on land you either own or rent. Since you’re self-employed, you get Social Security coverage by:

  • Figuring your self-employment tax on Schedule SE
  • Paying self-employment tax

Your farm income might fall below a certain level. If so, you can use an alternate method to figure self-employment tax.

Since it’s difficult to predict farm income, the estimated tax rules are different for farmers.

To learn more, see Publication 225: Farmer’s Tax Guide at www.irs.gov.

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