Instructions for Schedule F (Form 1040)
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1213Do not deduct the following.
- Personal or living expenses (such as taxes, insurance, or repairs on your home) that do not produce farm
income.
- Expenses of raising anything you or your family used.
- The value of animals you raised that died.
- Inventory losses.
- Personal losses.
If you were repaid for any part of an expense, you must subtract the amount you were repaid from the
deduction.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1262If you produced real or tangible personal property or acquired property for resale, certain expenses must be included in inventory costs or capitalized. These expenses include the direct costs of the property and the share of any indirect costs allocable to that property. However, these rules generally do not apply to expenses
of:
- Producing any plant that has a preproductive period of 2 years or
less,
- Raising animals, or
- Replanting certain crops if they were lost or damaged by reason of freezing temperatures, disease, drought, pests, or
casualty.
 | Exceptions (1) and (2) do not apply to tax shelters, farming syndicates, partnerships, or corporations required to use the accrual method of accounting under section 447 or
448(a)(3). |
If you capitalize your expenses, do not reduce your deductions on lines 10 through 32e by the capitalized expenses. Instead, enter the total amount capitalized in parentheses on line 32f (to indicate a negative amount) and enter
263A
in the space to the left of the total. See
Preproductive period expenses, later, for details.
But you may be able to currently deduct rather than capitalize the expenses of producing a plant with a preproductive period of more than 2 years. See
Election to deduct certain preproductive period expenses next.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1333If the preproductive period of any plant you produce is more than 2 years, you can elect to currently deduct the expenses rather than capitalize them. But you cannot make this election for the costs of planting or growing citrus or almond groves incurred before the end of the fourth tax year beginning with the tax year you planted them in their permanent grove. You are treated as having made the election by deducting the preproductive period expenses in the first tax year for which you can make this election and by applying the special rules, discussed
later.
| In the case of a partnership or S corporation, the election must be made by the partner, shareholder, or member. This election cannot be made by tax shelters, farming syndicates, partnerships, or corporations required to use the accrual method of accounting under section 447 or
448(a)(3). |
Unless you obtain IRS consent, you must make this election for the first tax year in which you engage in a farming business involving the production of property subject to the capitalization rules. You cannot revoke this election without IRS
consent.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1369 If you make the election to deduct preproductive expenses for
plants:
- Any gain you realize when disposing of the plants is ordinary income up to the amount of the preproductive expenses you deducted,
and
- The alternative depreciation rules apply to property placed in service in any tax year your election is in
effect.
For details, see
Uniform Capitalization Rules in chapter 6 of Pub.
225.
In most cases, if you use the cash method of accounting and your prepaid farm supplies are more than 50% of your other deductible farm expenses, your deduction for those supplies may be limited. Prepaid farm supplies include expenses for feed, seed, fertilizer, and similar farm supplies not used or consumed during the year.
They also include the cost of poultry that would be allowable as a deduction in a later tax year if you were to:
- Capitalize the cost of poultry bought for use in your farming business and deduct it ratably over the lesser of 12 months or the useful life of the poultry,
and
- Deduct the cost of poultry bought for resale in the year you sell or otherwise dispose of
it.
If the limit applies, you can deduct prepaid farm supplies that do not exceed 50% of your other deductible farm expenses in the year of payment. You can deduct the excess only in the year you use or consume the supplies (other than poultry, which is deductible as explained above). For details and exceptions to these rules, see chapter 4 of Pub.
225.
Whether or not this 50% limit applies, your expenses for livestock feed paid during the year but consumed in a later year may be subject to the rules explained in the line 16
instructions.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1451You can deduct the actual expenses of operating your car or truck or take the standard mileage rate. You must use actual expenses if you used five or more vehicles simultaneously in your farming business (such as in fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that
vehicle.
You can take the standard mileage rate for 2012 only if you:
- Owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service, or
- Leased the vehicle and are using the standard mileage rate for the entire lease period.
If you take the standard mileage rate:
- Multiply the number of business miles driven by 55.5 cents,
and
- Add to this amount your parking fees and tolls, and enter the total on line
10.
Do not deduct depreciation, rent or lease payments, or your actual operating
expenses.
If you deduct actual expenses:
- Include on line 10 the business portion of expenses for gasoline, oil, repairs, insurance, license plates, etc.,
and
- Show depreciation on line 14 and rent or lease payments on line
24a.
If you claim any car or truck expenses (actual or the standard mileage rate), you must provide the information requested on Form 4562, Part V. Be sure to attach Form 4562 to your
return.
For details, see chapter 4 of Pub.
463.
Deductible conservation expenses generally are those that are paid to conserve soil and water for land used in farming, to prevent erosion of land used for farming, or for endangered species recovery. These expenses include (but are not limited to) costs for the
following.
- The treatment or movement of earth, such as leveling, grading, conditioning, terracing, contour furrowing, and the restoration of soil
fertility.
- The construction, control, and protection of diversion channels, drainage ditches, irrigation ditches, earthen dams, watercourses, outlets, and
ponds.
- The eradication of brush.
- The planting of windbreaks.
- The achievement of site-specific management actions recommended in recovery plans approved pursuant to the Endangered Species Act of
1973.
These expenses can be deducted only if they are consistent with a conservation plan approved by the Natural Resources Conservation Service of the Department of Agriculture or a recovery plan approved pursuant to the Endangered Species Act of 1973, for the area in which your land is located. If no plan exists, the expenses must be consistent with a plan of a comparable state agency. You cannot deduct the expenses if they were paid or incurred for land used in farming in a foreign
country.
Do not deduct expenses you paid or incurred to drain or fill wetlands, or to prepare land for center pivot irrigation
systems.
Your deduction cannot exceed 25% of your gross income from farming (excluding certain gains from selling assets such as farm machinery and land). If your conservation expenses are more than the limit, the excess can be carried forward and deducted in later tax years. However, the amount deductible for any one year cannot exceed the 25% gross income limit for that
year.
For details, see chapter 5 of Pub.
225.
Enter amounts paid for custom hire or machine work (the machine operator furnished the equipment).
Do not include amounts paid for rental or lease of equipment you operated yourself. Instead, report those amounts on line
24a.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1633You can deduct depreciation of buildings, improvements, cars and trucks, machinery, and other farm equipment of a permanent
nature.
Do not deduct depreciation on your home, furniture or other personal items, land, livestock you bought or raised for resale, or other property in your inventory.
You can also elect under section 179 to expense a portion of the cost of certain property you bought in 2012 for use in your farming business. The section 179 election is made on Form
4562.
For information about depreciation and the section 179 deduction, see Pub.
946 and chapter 7 of Pub.
225. For details on the special depreciation allowance, see chapter 3 of Pub.
946.
See the Instructions for Form 4562 for information on when you must complete and attach Form
4562.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1671Deduct contributions to employee benefit programs that are not an incidental part of a pension or profit-sharing plan included on line 23. Examples are accident and health plans, group-term life insurance, and dependent care assistance programs. If you made contributions on your behalf as a self-employed person to a dependent care assistance program, complete Form 2441, Parts I and III, to figure your deductible contributions to that
program.
Contributions you made on your behalf as a self-employed person to an accident
and health plan or for group-term life insurance are not deductible on Schedule
F (Form 1040). However, you may be able to deduct on Form 1040, line 29 (or on
Form 1040NR, line 29), the amount you paid for health insurance on behalf of
yourself, your spouse, and dependent(s) even if you do not itemize your
deductions. See the instructions for Form 1040, line 29, or Form 1040NR, line
29, for details.
You must reduce your line 15 deduction by the amount of any credit for small employer health insurance premiums determined on Form 8941. See Form 8941 and its instructions to determine which expenses are eligible for the
credit.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1704If you use the cash method, you cannot deduct when paid the cost of feed your livestock will consume in a later year unless all of the following
apply.
- The payment was for the purchase of feed rather than a deposit.
- The prepayment had a business purpose and was not made merely to avoid
tax.
- Deducting the prepayment will not materially distort your
income.
If all of the above apply, you can deduct the prepaid feed when paid, subject to the overall limit for
Prepaid farm supplies
explained earlier. If all of the above do not apply, you can deduct the prepaid
feed only in the year it is consumed.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1738Do not include the cost of transportation incurred in purchasing livestock held for resale as freight paid. Instead, add these costs to the cost of the
livestock.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1750Deduct on this line premiums paid for farm business insurance. Deduct on line 15 amounts paid for employee accident and health insurance. Amounts credited to a reserve for self-insurance or premiums paid for a policy that pays for your lost earnings due to sickness or disability are not deductible. For details, see chapter 6 of Pub.
535.
The tax treatment of interest expense differs depending on its type. For example, home mortgage interest and investment interest are treated differently.
Interest allocation
rules require you to allocate (classify) your interest expense so it is deducted
(or capitalized) on the correct line of your return and receives the right tax
treatment. These rules could affect how much interest you are allowed to deduct
on Schedule F (Form 1040).
In most cases, you allocate interest expense by tracing how the proceeds of the loan are used. See chapter 4 of Pub.
535 for details.
If you paid interest on a debt secured by your main home and any of the proceeds from that debt were used in your farming business, see chapter 4 of Pub.
535 to figure the amount to include on lines 21a and 21b.
If you have a mortgage on real property used in your farming business (other than your main home), enter on line 21a the interest you paid for 2012 to banks or other financial institutions for which you received a Form 1098 (or similar statement). If you did not receive a Form 1098, enter the interest on line
21b.
If you paid more mortgage interest than is shown on Form 1098, see chapter 4 of Pub.
535
to find out if you can deduct the additional interest. If you can, include the
amount on line 21a. Attach a statement to your return explaining the difference
and enter
See attached
in the margin next to line 21a.
If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage and the other person received the Form 1098, include your share of the interest on line 21b. Attach a statement to your return showing the name and address of the person who received the Form 1098. In the margin next to line 21b, enter
See attached.
Do not deduct interest you prepaid in 2012 for later years; include only the part that applies to
2012.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1870Enter the amounts you paid for farm labor. Do not include amounts paid to yourself. Reduce your deduction by the amounts claimed
on:
- Form 5884, Work Opportunity Credit;
- Form 8844, Empowerment Zone Employment Credit;
- Form 8845, Indian Employment Credit; and
- Form 8932, Credit for Employer Differential Wage Payments.
Include the cost of boarding farm labor but not the value of any products they used from the farm. Include only what you paid household help to care for farm
laborers.
| If you provided taxable fringe benefits to your employees, such as personal use of a car, do not include in farm labor the amounts you depreciated or deducted
elsewhere. |
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1926Enter your deduction for contributions to employee pension, profit-sharing, or annuity plans. If the plan included you as a self-employed person, enter contributions made as an employer on your behalf on Form 1040, line 28 (or on Form 1040NR, line 28), not on Schedule F (Form
1040).
In most cases, you must file the applicable form listed next if you maintain a pension, profit-sharing, or other funded-deferred compensation plan. The filing requirement is not affected by whether or not the plan qualified under the Internal Revenue Code, or whether or not you claim a deduction for the current tax year. There is a penalty for failure to timely file these
forms.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1940File this form if you have a one-participant retirement plan that meets certain requirements. A one-participant plan is a plan that covers only you (or you and your
spouse).
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1949File this form if you have a small plan (fewer than 100 participants in most cases) that meets certain
requirements.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e1959File this form for a plan that does not meet the requirements for filing Form 5500-EZ or Form
5500-SF.
For details, see Pub.
560.
If you rented or leased vehicles, machinery, or equipment, enter on line 24a the business portion of your rental cost. But if you leased a vehicle for a term of 30 days or more, you may have to reduce your deduction by an inclusion amount.
See
Leasing a Car in chapter 4 of Pub.
463 to figure this amount.
Enter on line 24b amounts paid to rent or lease other property such as pasture or
farmland.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2004Enter amounts you paid for incidental repairs and maintenance of farm buildings, machinery, and equipment that do not add to the property's value or appreciably prolong its
life.
Do not deduct repairs or maintenance on your home.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2028You can deduct the following taxes on this line.
- Real estate and personal property taxes on farm business assets.
- Social security and Medicare taxes you paid to match what you are required to withhold from farm employees' wages without consideration for the temporary employee payroll tax cut for
2012.
- Federal unemployment tax.
- Federal highway use tax.
- Contributions to state unemployment insurance fund or disability benefit fund if they are considered taxes under state
law.
Do not deduct the following taxes on this line.
- Federal income taxes, including your self-employment tax. However, you can deduct your employer-equivalent portion of self-employment tax on Form 1040, line 27 or Form 1040NR, line
27.
- Estate and gift taxes.
- Taxes assessed for improvements, such as paving and sewers.
- Taxes on your home or personal use property.
- State and local sales taxes on property purchased for use in your farming business. Instead, treat these taxes as part of the cost of the property.
- Other taxes not related to your farming business.
Enter amounts you paid for gas, electricity, water, and other utilities for business use on the farm. Do not include personal utilities. You cannot deduct the base rate (including taxes) of the first telephone line into your residence, even if you use it for your farming business. But you can deduct expenses you paid for your farming business that are more than the cost of the base rate for the first phone line. For example, if you had a second phone line, you can deduct the business percentage of the charges for that line, including the base rate
charges.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2130Include all ordinary and necessary farm expenses not deducted elsewhere on Schedule F (Form 1040), such as advertising, office supplies, etc. Do not include fines or penalties paid to a government for violating any
law.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2139Any loss from this activity that was not allowed last year because of the at-risk rules is treated as a deduction allocable to this activity in 2012.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2161See chapter 10 of Pub.
535.
If your farming business began in 2012, you can elect to deduct up to $5,000 of certain business start-up costs paid or incurred after October 22, 2004. The $5,000 limit is reduced (but not below zero) by the amount by which your start-up costs exceed $50,000. Your remaining start-up costs can be amortized over a 180-month period, beginning with the month the farming business began. For details, see chapters 4 and 7 of Pub.
225. For amortization that begins in 2012, you must complete and attach Form
4562.
You may be able to deduct certain expenses for business use of your home, subject to limitations. Use the worksheet in Pub. 587 to figure your allowable deduction. Do not use Form
8829.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2224Any loss from this activity that was not allowed last year because of the excess farm loss rules is treated as a deduction allocable to this activity in
2012.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2241Reforestation costs are generally capital expenditures. However, for each qualified timber property, you can elect to expense up to $10,000 ($5,000 if married filing separately) of qualifying reforestation costs paid or incurred in
2012.
You can elect to amortize the remaining costs over 84 months. For amortization that begins in 2012, you must complete and attach Form
4562.
The amortization election does not apply to trusts, and the expense election does not apply to estates and trusts. For details on reforestation expenses, see chapters 4 and 7 of Pub.
225.
You can include on this line fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to your farming business. Include fees for tax advice and for the preparation of tax forms related to your farming business. Also include expenses incurred in resolving asserted tax deficiencies related to your farming
business.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2283You can deduct the amount you paid for tools that have a short life or cost a small amount, such as shovels and
rakes.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2292In most cases, you can deduct expenses for farm business travel and 50% of your business meals and entertainment. But there are exceptions and limitations. See the instructions for Schedule C (Form 1040), lines 24a and
24b.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2323If you had preproductive period expenses in 2012 that you are capitalizing, enter the total of these expenses in parentheses on line 32f (to indicate a negative amount) and enter
263A
in the space to the left of the total.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2357If line 32f is a negative amount, subtract it from the total of lines 10 through 32e. Enter the result on line
33.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2366taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2376If line 33 is more than line 9, do not enter your loss on line 34 until you have applied the excess farm loss rules, the at-risk rules, and the passive activity loss rules. To apply these rules, follow the instructions for lines 35 and 36, and the Instructions for Form 8582. After applying these rules, the amount on line 34 will be your allowable loss, and it may be smaller than the amount figured by subtracting line 33 from line
9.
If line 9 is more than line 33, and you do not have prior year unallowed passive activity losses, subtract line 33 from line 9. The result is your net profit.
If line 9 is more than line 33, and you have prior year unallowed passive activity losses, do not enter your net profit on line 34 until you have figured the amount of prior year unallowed passive activity losses you may claim this year for this activity. Use Form 8582 to figure the amount of prior year unallowed passive activity losses you may include on line 34. Make sure to indicate that you are including prior year passive activity losses by entering "PAL" to the left of the entry space.
If you checked the "No" box on line E, see the Instructions for Form 8582; you may need to include information from this schedule on that form, even if you have a net profit.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2398Subtract line 33 from line 9. If the amount is a loss, the partners may need to apply the excess farm loss rules, the at-risk rules, and the passive activity loss rules to determine the amount of their allowable
loss.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2406Once you have figured your net profit or allowable loss, report it as
follows.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2415Enter your net profit or allowable loss here and on Form 1040, line 18, and Schedule SE (Form 1040), line
1a.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2423Enter the net profit or allowable loss here and on Form 1040NR, line 19. You should also enter this amount on Schedule SE (Form 1040), line 1a if you are covered under the U.S. social security system due to an international social security agreement currently in effect. See the Schedule SE (Form 1040) instructions for information on international social security
agreements.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2436Enter the net profit or loss here and on Form 1065, line 5 (or Form 1065-B, line 7). Because the excess farm loss rules are applied at the partner level, the partnership will notify each partner on the Schedule K-1 if the partnership received one of the subsidies discussed later. Each partner should complete one of the excess farm loss worksheets to determine if there is an excess farm
loss.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2447Enter the net profit or allowable loss here and on Form 1041, line
6.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2457If you and your spouse had community income and are filing separate returns, see the Instructions for Schedule SE (Form 1040) before figuring self-employment tax.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2465If you have a net profit on line 34, this amount is earned income and may qualify you for the earned income credit if you meet certain conditions. See the instructions for Form 1040, lines 64a and 64b, for
details.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2478
If you received social security retirement or disability benefits in addition to
CRP payments, the CRP payments are not subject to self-employment tax. You will
deduct these payments from your net farm profit or loss on Schedule SE (Form
1040), line 1b. Do not make any adjustment on Schedule F (Form 1040).
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2488Line 35 should be answered with respect to your
farming business
(defined later), and not just for the farming activities reported on this
Schedule F. You may also have reported farming activities on another Schedule F
or on Form 4835.
Check the
Yes
box if you received one of the following subsidies in 2012.
- Any direct or counter-cyclical payments under title I of the Food, Conservation, and Energy Act of 2008 (or any payment you elected instead of this
payment).
- Any Commodity Credit Corporation loan.
You are considered to have received one of these subsidies in 2012 if you are a partner or shareholder in a partnership or S corporation that received one of these subsidies during 2012. Check the "No" box if you did not receive one of these subsidies in
2012.
If you checked the
Yes
box, your farm loss may be reduced. You must apply the excess farm loss rules,
discussed next.
 | If you checked the "No" box, you do not have excess farm
loss. |
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2535If you received one of the subsidies listed above, part of your loss may be excess farm loss. Excess farm loss is not an allowable loss. Instead, excess farm loss is carried forward to the next year and treated as a
deduction.
Your excess farm loss for a year is the amount by which your total deductions from your farming businesses exceed your total gross income or gain from your farming businesses, plus a threshold amount. The threshold amount is the greater of $300,000 ($150,000 if your filing status is married filing separately) or your total net profit or loss from farming businesses for the last five years (2007-2011), including for each of those years any net gain from the sale of property used in your farming businesses.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2547A farming business generally is the trade or business of farming, including operating a nursery or sod farm or raising or harvesting of trees bearing fruit, nuts, or other crops, or ornamental trees, such as evergreen trees, if they are cut within the first 6 years.
For purposes of calculating your excess farm loss for the year, a farm business also includes the
following.
- A trade or business of processing a farm commodity, even if it is not incidental to your
farm.
- Participating in a cooperative that processes a farm commodity.
- Any interest in a partnership or S corporation involved in a farming business.
To figure your excess farm loss, you can use one of the excess farm loss worksheets, later. You may need to adjust your income or deductions before figuring your excess farm loss.
If you file multiple copies of Schedule F (Form 1040), Schedule C (Form 1040),
or Schedule E (Form 1040) as part of your farming businesses, you must combine
the income, deductions, and net gain/loss for purposes of determining whether
you have an excess farm loss on the worksheets. If you sold any property used in
your farming businesses, you must include any gain or loss on the sale of that
property (reported on Form 4797, Sales of Business Property, or Schedule D (Form
1040), Capital Gains and Losses). Be sure to include the gain or loss
attributable to property used in your
farming businesses
(defined earlier). Do not include gain or loss attributable to property used in
nonfarming businesses or nonbusiness property.
Because your farming business includes any trade or business of processing a farm commodity that is not incidental to your farm, you may have farming business activities that are reported on Schedule C (Form 1040) that you must also include when figuring your excess farm loss. Any losses from a farming business activity reported on Schedule C (Form 1040) may be limited by the excess farm loss
rules.
Because your farming business includes your interest in a partnership or S corporation, you may have farming business activities that are reported on Schedule E (Form 1040) that you must also include when figuring your excess farm loss. Any losses from a farming business activity reported on Schedule E (Form 1040) may be limited by the excess farm loss
rules.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2599Certain deductions, including the domestic production activities deduction under section 199 and the deduction for the employer-equivalent portion of self-employment tax, may need to be included when determining your excess farm loss if the deductions are attributable to your
farming business (defined earlier).
In particular, the deduction for the employer-equivalent portion of self-employment tax will not be attributable to your farming business on Schedule F (Form 1040) or your business of processing a farm commodity on Schedule C (Form 1040) if the combined amounts on those schedules produce a loss. But the deduction for the employer-equivalent portion of self-employment tax should be taken into account when the combined amounts on those schedules produce income (or the farm optional method on Schedule SE (Form 1040) is used) and there is a large loss on Schedule E (Form 1040) passed through from a partnership or S
corporation.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2610Any deduction for losses arising from fire, storm, or other casualty, or from disease or drought involving any farming business should not be included when determining your excess farm
loss.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2618You must calculate and apply your excess farm loss before calculating any limits due to the at-risk rules or the passive activity loss
rules.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2628You may complete one of these worksheets to determine if you have an excess farm loss in 2012. Do not attach these worksheets to your return; keep them for your records. You will need them next year when any excess farm loss may be deducted. Which worksheet you should use depends on the nature and extent of your farming
business.
- Use
Worksheet 1
if your farming businesses include only profit or loss reported on one or more
Schedules F (Form 1040).
- Use
Worksheet 2
if your farming businesses include Schedule F (Form 1040) and any Schedule C
(Form 1040) activity of processing a farm commodity.
- Use
Worksheet 3
if your farming businesses include Schedule F (Form 1040) and a Schedule E (Form
1040) interest in a partnership or S corporation involved in a farming business.
- Use
Worksheet 4
if your farming businesses include Schedule F (Form 1040), Schedule C (Form
1040) activity of processing a farm commodity, a Schedule E (Form 1040) interest
in a partnership or S corporation involved in a farming business, and farm
rental income or loss reported on Form 4835.
- Use
Worksheet 5
if your farming business is limited to only farm rental income or loss reported
on Form 4835.
You must reduce your loss by the amount of your excess farm loss. Subtract line 33 from line 9 and reduce the number by your excess farm loss. Complete line 36 before entering an amount on line
34.
Subtracting line 33 from line 9 results in ($400,000). You have only one farming business and use Worksheet 1 to figure an excess farm loss of ($100,000). Your allowable loss is reduced to ($300,000). This will be the amount you enter on line 34 unless the at-risk or passive activity loss rules reduce it
further.
Any loss from this activity not allowed for 2012 because of the excess farm loss rules is treated as a deduction allocable to the activity in
2013.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2680Use your loss reduced by the excess farm loss to calculate any further limitations due to the at-risk rules or passive activity loss
rules.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2691If you have more than one farming business with a loss this year, allocate the excess farm loss amount on a pro rata basis among those farming businesses. If you have more than one farming business, but only one has a loss, allocate all of the excess farm loss to the farming business with the loss. Do not allocate excess farm loss to a farming business that has a net
profit.
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2700 | You do not need to complete line 36 if line 9 is more than line 33.
|
taxmap/instr/i1040sf-007.htm#en_us_publink_17152rd0e2710In most cases, if you have a loss from a farming activity and amounts invested in the activity for which you are not at risk, you must complete Form 6198 to figure your allowable loss. The at-risk rules generally limit the amount of loss (including loss on the disposition of assets) you can claim to the amount you could actually lose in the
activity.
Check box 36b if you have amounts invested in this activity for which you are not at risk, such as the
following.
- Nonrecourse loans used to finance the activity, to acquire property used in the activity, or to acquire the activity that are not secured by your own property (other than property used in the activity). However, there is an exception for certain nonrecourse financing borrowed by you in connection with holding real
property.
- Cash, property, or borrowed amounts used in the activity (or contributed to the activity, or used to acquire the activity) that are protected against loss by a guarantee, stop-loss agreement, or other similar arrangement (excluding casualty insurance and insurance against tort
liability).
- Amounts borrowed for use in the activity from a person who has an interest in the activity, other than as a creditor, or who is related under section 465(b)(3)(C) to a person (other than you) having such an
interest.
Before determining your allowable loss, you must check box 36a or 36b to determine if your loss from farming is limited by the at-risk rules. Follow the instructions below that apply to your box 36
activity.
If all your investment amounts are at risk in this activity, check box 36a. If you also checked the
Yes
box on Schedule F (Form 1040), line E, your remaining loss (after applying the
excess farm loss rules) is your allowable loss. The at-risk rules and the
passive activity loss rules do not apply. See
Line 34, earlier, for how to report your allowable loss.
But if you checked the
No
box on Schedule F (Form 1040), line E, you may need to complete Form 8582 to
figure your allowable loss to enter on line 34. See the Instructions for Form
8582.
If some investment is not at risk, check box 36b; the at-risk rules apply to your
loss.
If you also checked the
Yes
box on Schedule F (Form 1040), line E, complete Form 6198 to determine the
amount of your allowable loss. The passive activity loss rules do not apply. See
Line 34, earlier, for how to report your allowable loss.
But if you checked the
No
box on Schedule F (Form 1040), line E, the passive activity loss rules may
apply. First complete Form 6198 to figure the amount of your loss that is
at-risk. If your at-risk amount is zero or less, enter -0- on line 34; then see
Line 34, earlier, for where to report this amount. If your at-risk amount is more than zero, see the Instructions for Form 8582 to determine your passive activity loss limitation and the amount of your loss that will be allowed on line 34. Be sure to attach Form 6198 to your
return.
| If you checked box 36b because some investment is not at risk and you do not attach Form 6198, the processing of your return may be
delayed. |
Any loss from this activity not allowed for 2012 only because of the at-risk rules is treated as a deduction allocable to the activity in
2013.
For details, see Pub. 925 and the Instructions for Form 6198.
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