Business of Farming

For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. You are not farming if you are engaged only in forestry or the growing of timber.

Farm defined. A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards. A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. It doesn’t include an area where they are merely caught or harvested. A plant nursery is a farm for purposes of deducting soil and water conservation expenses.

Farm rental. If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. If you get cash rental for a farm you own that is not used in farm production, you can’t deduct soil and water conservation expenses for that farm.

If you receive a fixed rental payment that is not based on farm production, you are in the
business of farming only if you materially participate in operating or managing the farm.

If you can’t determine what the dividend is for, report it as income on Schedule Expensis.

**SCHEDULE F EXPENSES:

  • Accounting fees.
  • Advertising.
  • Business travel and meals.
  • Commissions. • Consultant fees.
  • Crop scouting expenses.
  • Dues to cooperatives.
  • Educational expenses (to maintain and improve farming skills).
  • Farm-related attorney fees.
  • Farm magazines.
  • Ginning.
  • Insect sprays and dusts.
  • Litter and bedding.
  • Livestock fees.
  • Marketing fees.
  • Milk assessment.
  • Recordkeeping expenses.
  • Service charges.
  • Small tools expected to last 1 year or less.
  • Stamps and stationery.
  • Subscriptions to professional, technical, and trade journals that deal with farming.
  • Tying material and containers.
  • Utilities and Internet

Business start-up and organizational costs. You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized.