What Is a Schedule F Tax Form? Profit or Loss From Farming

The Schedule F tax form is what a farmer attaches to Form 1040 to report the income and expenses from a farming business and calculate the net profit or loss for the year.¹ That bottom-line number then flows onto your individual return and onto Schedule SE, where it drives your self-employment tax. If you grow crops, raise livestock or poultry, run an orchard or ranch, or raise fish commercially as a sole proprietor or single-member LLC, this is your form.

Who Has to File Schedule F

You file Schedule F if you operate a farming business as an individual, a sole proprietor, or the sole member of a domestic LLC.² The IRS treats “farming” broadly: crops, livestock, poultry, ranches, orchards, and commercial fish operations all count. Schedule F can also be filed with Form 1040-SR (age 65 and older), Form 1041 (estates and trusts), or Form 1065 (partnerships). Partnerships and S corporations that farm generally report at the entity level, and the income passes through to the owners.

Married Couples Who Farm Together

If you and your spouse jointly own and operate the farm, you can either file a partnership return or elect qualified joint venture treatment. The joint venture election skips Form 1065, but each spouse files a separate Schedule F splitting income, expenses, gains, and losses according to their share, plus a separate Schedule SE.² The payoff is that both spouses build Social Security and Medicare credits on their portion of the earnings.

When You Use Form 4835 Instead

If you own farmland and rent it out to someone else who does the actual farming, and you don’t materially participate in the operation, that rental activity goes on Form 4835, not Schedule F.³ Schedule F is for the person doing the farming; Form 4835 is for the landlord collecting crop-share rent.

Material participation matters for another reason too. Even a legitimate farming business can have its losses treated as passive, and therefore usable only against other passive income, if you don’t participate enough. The IRS uses seven tests; most active farmers clear the simplest one by working more than 500 hours in the activity during the year.⁴ The passive-loss issue tends to hit part-time farmers, investor-owners, and heirs who don’t actively work the ground.

Cash Method or Accrual Method

Before you fill in a single number, decide how you’re accounting for the year. Most individual farmers use the cash method. You report income when you actually or constructively receive it, and you deduct expenses when you pay them.⁵ That timing flexibility, achieved by moving sales and purchases across the December 31 line, is a big reason cash is popular.

Under the accrual method, income is recorded when earned (usually at the point of sale) and expenses when the obligation arises, whether or not cash has changed hands.² Some larger operations are required to use accrual. Once you pick a method, you have to stick with it unless the IRS approves a change.

Your choice determines which part of the form you use for income. Cash-method filers report income directly in Part I. Accrual-method filers work through Part III and carry the result back to Part I, line 9. Both methods use Part II for expenses.

Reporting Farm Income

Cash-method farmers list receipts in Part I: sales of raised livestock and crops, agricultural program payments, Commodity Credit Corporation loans, crop insurance proceeds, federal disaster payments, custom hire and machine work, cooperative distributions, and other farm income.² The total on line 9 is your gross farm income before deductions.

Accrual filers use Part III instead. You report sales of livestock, produce, grains, and other products, then adjust for inventory: add purchases to beginning inventory and subtract ending inventory to arrive at cost of goods sold.⁶ The gross income figure on line 50 flows back to Part I, line 9.

Government Payments and Crop Insurance

Agricultural program payments, including Conservation Reserve Program payments, go on line 4a. CRP payments are farm income subject to self-employment tax unless you’re receiving Social Security retirement or disability benefits.³

Crop insurance and federal crop disaster payments are generally reported the year you receive them. Cash-method farmers can elect a one-year deferral if, under normal business practice, the crop income would have been reported the following year.⁷ The election requires a statement attached to your return identifying the destroyed crops, the cause and date of damage, the amounts received, and the insurance carriers. Federal disaster payments qualify for the same deferral.

Deducting Farm Expenses

Part II is where every deductible operating cost lives, and both cash and accrual filers fill it in. Typical categories:

Feed, seed, and fertilizer
Chemicals such as pesticides and herbicides
Wages paid to hired labor (not your own labor)
Interest on farm-related loans
Veterinary and breeding fees
Rent or lease payments for land, equipment, or vehicles
Repairs and maintenance on buildings, fences, and equipment
Insurance premiums other than health insurance
Utilities and fuel

Total Part II expenses are subtracted from gross income, producing your net farm profit or loss on line 34.⁸ That number goes to Schedule 1 (Form 1040), line 6, and to Schedule SE.

Depreciation on Equipment and Buildings

Farm equipment, buildings, and vehicles are deducted over time through depreciation, and you have three routes:

Regular depreciation spreads the cost across the asset’s useful life (roughly 5 years for equipment, 7 years for certain farm structures, longer for buildings).
Section 179 lets you expense the full purchase price in the year the asset is placed in service, up to $2,560,000 for 2026, with a phase-out beginning at $4,090,000 of total qualifying purchases.⁹
Bonus depreciation, for qualifying farm equipment and certain plants acquired after January 19, 2025, is now a permanent 100 percent first-year deduction, replacing the earlier phase-down.¹⁰

Section 179 can’t exceed your net taxable income from all active businesses; the unused portion carries forward.

Self-Employment Tax on the Bottom Line

Net farm profit is subject to both income tax and self-employment tax. You calculate the SE tax on Schedule SE using the number from Schedule F, line 34.⁸

For 2026, the combined SE tax rate is 15.3 percent: 12.4 percent Social Security on earnings up to $184,500, plus 2.9 percent Medicare on all earnings.¹¹ An additional 0.9 percent Medicare surtax applies to net self-employment income above $200,000 (single) or $250,000 (married filing jointly). Half of the SE tax is deductible as an adjustment to income on Schedule 1, which lowers your adjusted gross income.¹²

The Farm Optional Method

If you had a loss or very low farm income for the year, Schedule SE’s farm optional method lets you report two-thirds of gross farm income (up to a cap) as your net self-employment earnings even when actual profit was zero or negative.¹³ You pay a small amount of SE tax and, in exchange, get Social Security credits for the year and possible access to the Earned Income Credit. There’s no cap on how many years you can use it.

What Happens If You Have a Loss

Farmers get treatment other business owners don’t. The farming portion of a net operating loss can be carried back two years, applied to the earliest year first, generating a refund of tax already paid.¹⁴ Anything left carries forward indefinitely. You can also waive the carryback and carry the whole loss forward. In carry-forward years after 2020, the loss can generally offset up to 80 percent of taxable income.

There’s still a ceiling on how much loss you can use against non-business income in a given year. For 2026, the excess business loss limit is $256,000 for single filers and $512,000 for joint filers.⁹ Anything above the cap becomes a net operating loss carried forward. The calculation happens on Form 461.

The March 1 Filing Break

Farmers who get at least two-thirds of their total gross income from farming can skip quarterly estimated tax payments entirely, provided they file the return and pay all tax due by March 1 of the following year.¹⁵ If March 1 falls on a weekend or holiday, the deadline moves to the next business day.

Prefer the regular April deadline? You can still avoid the estimated tax penalty by making one estimated payment by January 15. The two-thirds test can be applied to either the current year or the prior year.

Filing and Recordkeeping

Schedule F is filed as part of your complete return, attached to Form 1040 or Form 1040-SR. Electronic filing through IRS-authorized software confirms receipt immediately. Paper filers mail the whole package to the IRS processing center for their state, and the address depends on whether a payment is enclosed.

Keep the paperwork that backs up every entry: sales receipts, bank statements, purchase invoices, loan documents, crop insurance correspondence, and depreciation schedules. The standard IRS audit window is three years from filing, and six years if gross income was understated by more than 25 percent, so records should stay accessible at least that long.

Penalties for Errors

Mistakes on Schedule F carry the same consequences as errors anywhere else on your return. Underpayments caused by negligence or a substantial understatement of income face a 20 percent accuracy-related penalty.¹⁶ Filing a return you know is false is a felony, with fines up to $100,000 for individuals and up to three years in prison.¹⁷

1
Internal Revenue Service. About Schedule F (Form 1040), Profit or Loss From Farming
2
Internal Revenue Service. Instructions for Schedule F (Form 1040)
3
Internal Revenue Service. Conservation Reserve Program Annual Rental Payments and Self-Employment Tax
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Internal Revenue Service. Publication 925 (2025), Passive Activity and At-Risk Rules
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Internal Revenue Service. Publication 538, Accounting Periods and Methods
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Internal Revenue Service. Schedule F (Form 1040)
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eCFR. 26 CFR 1.451-6 – Election to Include Crop Insurance Proceeds in Gross Income in the Taxable Year Following the Taxable Year of Destruction or Damage
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Internal Revenue Service. Instructions for Schedule F (Form 1040)
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Internal Revenue Service. Rev. Proc. 2025-32
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Internal Revenue Service. Interim Guidance on Additional First Year Depreciation Deduction Under Section 168(k)
11
Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
12
Internal Revenue Service. Topic No. 554, Self-Employment Tax
13
Internal Revenue Service. Instructions for Schedule SE (Form 1040)
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Internal Revenue Service. Instructions for Form 172
15
Internal Revenue Service. Topic No. 416, Farming and Fishing Income
16
Office of the Law Revision Counsel. 26 U.S.C. 6662 – Imposition of Accuracy-Related Penalty on Underpayments
17
Office of the Law Revision Counsel. 26 U.S.C. 7206 – Fraud and False Statements