Schedule F Tax Form for Farms: Reporting Profit or Loss From Farming

Filing taxes as a farmer can be complicated, especially when you're juggling income from crops, livestock, and equipment costs. If you're a sole proprietor or single-member LLC, failing to report your farm income and expenses correctly could mean overpaying taxes or facing IRS scrutiny.

Many farmers miss out on valuable deductions or make costly reporting mistakes simply because they don’t understand how Schedule F works. Without the right knowledge, you could be leaving money on the table or triggering an audit.

This guide breaks down everything you need to know about Schedule F (Profit or Loss From Farming), including who needs to file, what income and deductions to report, and how to avoid common errors when preparing your farm tax return.

Key takeaways

• Schedule F is used to report farming income and expenses if you operate a farm for profit as an individual.
• Qualifying expenses such as feed, fuel, equipment repairs, and depreciation can reduce your taxable income.
• Detailed recordkeeping is essential to ensure accuracy and support your claims in the event of an audit.
• Filing Schedule F accurately can reduce your tax liability and ensure compliance with IRS rules.

What is Schedule F?

Schedule F is a federal tax form used by individuals to report farming income and expenses. It’s attached to your personal tax return (Form 1040) and allows farmers to report:

• Income from sales of agricultural products.
• Eligible farm-related expenses.
• Net profit or loss from farming activities.

It is not used by corporations, partnerships, or co-ops. Those entities file different forms (such as Form 1120 or 1065).

Watch a free workshop video on how to simplify your farm taxes

Who must file Schedule F?

You must file Schedule F if:

• You operate your farm business structure as a sole proprietor or a single-member LLC.
• Your farm is run with the intent to make a profit (not as a hobby).
• You receive income from typical farming activities.

Qualifying farming operations include:

• Growing crops such as wheat, corn, soybeans, or vegetables.
• Raising livestock (cattle, pigs, poultry, sheep).
• Dairy or egg production.
• Fish farms or aquaculture.
• Orchards, vineyards, and tree farms.

If you’re unsure whether your activity qualifies, the IRS generally considers whether the farm is engaged for profit, based on multiple factors including time spent, businesslike operations, and profitability over time.

Types of income reported on Schedule F

Farming income includes more than just crop or livestock sales. Common sources of reportable income on Schedule F include:

• Sales of livestock and produce: Cattle, grains, vegetables, eggs, etc.
• Agricultural program payments: Government subsidies and conservation program payments.
• Commodity Credit Corporation (CCC) loans: If elected to treat loan proceeds as income.
• Custom hire income: Income from performing custom farming services like ploughing or harvesting.
• Cooperative distributions: Patronage dividends or income from co-ops.

All income received as part of your farming operation, whether in cash, barter, or inventory, must be reported.

Schedule F tax deductions

Schedule F allows a wide range of farming-related deductions. These expenses reduce your taxable income and must be directly tied to the operation of your farm.

Common schedule F deductions include:

• Seed and plants
• Feed for livestock
• Fertilizer and lime
• Pesticides and herbicides
• Machinery repairs and maintenance
• Depreciation on equipment, buildings, and vehicles
• Gasoline, diesel, and oil
• Insurance (liability, crop, property)
• Property taxes on farm land
• Utilities and phone used for farming
• Wages and contract labour
• Veterinary and breeding costs

Other schedule F expenses

You can also deduct interest on farm loans, rent or lease payments for equipment or land, and small tools or supplies.

Important: Personal expenses cannot be deducted. If you use a vehicle or a building for both personal and farm use, only the business-use portion is deductible.

Structure of the Schedule F form

The Schedule F tax form is divided into five parts:

Part I – Income

Here you report gross income from your farm operations, including sales of livestock and crops, CCC loans, and cooperative payments.

Part II – Expenses

This is the largest section. It includes a detailed list of eligible farm expenses, such as fertilizer, feed, veterinary costs, wages, repairs, and more.

Part III – Cost of goods sold (COGS)

If you're selling products like crops or livestock, this section helps determine your direct production costs, including inventory changes.

Part IV – Vehicle information

If you claim expenses for farm vehicles, this section captures mileage, usage, and other related details.

Part V – Other expenses

Any farm-related costs not listed in Part II go here (e.g., accounting fees, cell phone used for farm business).

Special considerations when filing Schedule F

Depreciation

Assets with a useful life over one year (tractors, barns, fencing) must be depreciated over time. Use Form 4562 to report depreciation and attach it to your return.

Hobby loss rules

If your farm consistently loses money and doesn’t operate like a business, the IRS may classify it as a hobby, disallowing deductions beyond income. Keep strong documentation to prove intent to earn a profit.

Prepaid expenses

Prepaid costs like bulk seed or fertilizer can only be deducted in the year they are used, unless certain exceptions are met.

Cash vs. accrual accounting

Most small farms use cash basis accounting, which reports income when received and expenses when paid. Accrual accounting is more complex but may offer benefits in some cases.

Common mistakes to avoid when you file a Schedule F

• Combining personal and farm expenses without proper separation.
• Failing to report barter income (e.g., trading produce for services).
• Overstating deductions or deducting ineligible costs.
• Missing small deductions such as tools, software subscriptions, or protective gear.
• Poor recordkeeping, making it hard to justify numbers on the return.

Recordkeeping tips for Schedule F

Accurate records help you prepare your return, defend against audits, and improve financial management. Keep:

• Receipts and invoices
• Bank statements
• Mileage logs for vehicles
• Sales records and inventory logs
• Copies of prior tax returns

Use farm accounting software and bookkeeping tools like QuickBooks for farming, Wave, or spreadsheets. The IRS recommends retaining records for at least three years, but seven is safer if you claim asset depreciation.

Read more about farm recordkeeping tips

How Schedule F affects other tax areas

Filing Schedule F has implications beyond your income tax:

• Self-employment tax: Farm income is subject to self-employment tax (reported on Schedule SE).
• Estimated taxes: Farmers often must pay estimated quarterly taxes unless two-thirds of income is from farming.
• Farm tax credits: Eligibility for credits like fuel tax credit or conservation program benefits may depend on accurate Schedule F filings.
• Social Security and Medicare: Your net farm profit contributes to your self-employment tax, which funds these benefits.

Schedule F filing tips and resources

When to file Schedule F

The due date for individual returns (including Schedule F) is April 15 unless you qualify for the March 1 early filing exemption for farmers who do not pay estimated taxes.

Where to get help on how to fill out Schedule F

• IRS Publication 225 (Farmer’s Tax Guide)
• Tax software with farm modules (TurboTax, TaxSlayer)
• Enrolled agents (EAs) or CPAs familiar with agricultural returns

Filing with a professional is often recommended, especially for farms with employees, depreciation, or multiple income streams.

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