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.
- Cultivating land
- Dairy farms
- Fruit farms
- Poultry farms
- Fish farms
- Stock farms
- Truck farms
- Selling crop shares
- Breeding and raising fur-bearing animals that aren’t dogs, cats, or other pets
Farm income includes:
- 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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