What is a Schedule F Form?

What Can Farmers Deduct?

The best part about Schedule F? Deductions! Farmers and ranchers can write off a lot of expenses, which lowers taxable income. Check out our Preparing for Tax Season webinar for more details on deductions. Some common deductions include:

• Seeds, fertilizer, and soil amendments

• Livestock feed and veterinary expenses

• Farm equipment repairs and fuel (yes, that tractor counts, too)

• Utilities like water and electricity for farm use

• Labor costs (hired hands, but not yourself)

• Interest on farm loans

Breaking Down Lines in the Schedule F Form

Here’s a detailed breakdown of what to enter on each line of Schedule F. We are NOT CPAs, so confirm with your CPA or tax professional to properly document your financial activity. 

Income Section (Part I – Farm Income)

• Line 1a: Sales of purchased livestock and other resale items: did you buy a calf and resell a fattened steer or buy piglets you raised for pork? Did you sell other farmers’ products in your CSA box? If it wasn’t born/raised on your farm, list those sales here.
• Line 1b: Cost or other basis of purchased livestock or other items reported on line 1a: here’s where you put the costs of the items or  you resold. The IRS only counts the profit (calculated on line 1c) as part of your income. 
• Line 2: Sales of livestock, produce, grains, and other products you raised: This will be the biggest number in Part I for most farmers. All of the sales of everything you raised on your farm goes here.  
• Line 3: Cooperative distributions: only pertinent if you got a Form 1099-PATR from a cooperative
• Line 4: Agricultural program payments: yes, government grants, insurance programs, cost-shares, etc. are taxable income. Bummer. You should have gotten a Form 1099-G from USDA helping you fill out this section.
• Line 5:  Commodity Credit Corporation (CCC) loans: this is a good “ask my CPA” or “ask my lender” one if you have a CCC loan — you can elect to report the proceeds from the loan or forfeit it. There are different tax implications for which you choose to do. 
• Line 6: Crop insurance proceeds and federal crop disaster payments: Yes, these are taxable income too (bummer, again). If your crop was damaged in one tax year and you received the proceeds the next, you can report it as income the year it was damaged OR defer to the next year (again, this is a good “ask my CPA” one to make sure you’re optimizing your specific tax situation). 
• Line 7: Custom hire (machine work): Did another farmer pay you for field prep, planting, harvesting, or other machine work? Put that income here.
• Line 8: Other income: this is ONLY farm other income and includes things like fuel tax credits. Remember to put income from other non-production enterprises on another tax form (usually Schedule C). 

Expense Section (Part II – Farm Expenses): many of these are self-explanatory, but here are a few that have some oddities around them. 

• Line 10: Car and truck expenses:  There are two ways to do car & truck expenses. One is “mileage” where you multiply miles driven for farm purposes by a standard rate the IRS gives (67 cents per mile in 2024). This requires you to track mileage, but usually gives you a higher deduction for older vehicles. The second method is “actual expenses” where you track depreciation, repairs, supplies, etc. This usually gives you a higher deduction for newer vehicles. If you use “actual expenses” do NOT include costs for fuel (that goes on line 19) or costs to lease the vehicle (that goes on line 24). 
• Line 12: Conservation expenses: To claim these as deductions, it’s safest to have a conservation plan with NRCS on file backing up the reason for incurring these expenses to conserve soil and water. 
• Line 14: Depreciation: this is calculated on Form 4562. If you have a lot of assets, this is a place where a CPA who can optimize your depreciation for your tax situation is probably worth the expense. 
• Line 21: Interest: If you live on the farm and have a farm mortgage (that is also your house mortgage), you can put some of the mortgage interest (the % that corresponds the % of the mortgage that’s for the farm business) here in addition to other interest expenses.
• Line 29: Taxes: This does NOT include federal income taxes. All other types of tax (including state income tax and federal Social Security/Medicare taxes) SHOULD go here. 

Things to Watch Out For

• Hobby Farm Rule: If you’re not making a profit three out of five years, the IRS may classify your farm as a hobby, which means no deductions on Schedule F.

• Depreciation: Big-ticket items like tractors and barns may need to be depreciated over several years rather than deducted all at once. We spent some time talking about depreciation in our Advanced Farm Financials webinar. 

• Farm Losses: If you report a loss, the IRS may take a closer look. Keeping good records is your best defense.