Instructions For Schedule F - Profit Or Loss From Farming- 2007 (Page 5 of 7) in pdf

Your deduction cannot exceed 25% of

spouse, and dependents even if you do not

If you have a mortgage on

How to report.

your gross income from farming (exclud-

itemize your deductions. See the instruc-

real property used in your farming business

ing certain gains from selling assets such as

tions for Form 1040, line 29, or Form

(other than your main home), enter on line

farm machinery and land). If your conser-

1040NR, line 28, for details.

23a the interest you paid for 2007 to banks

vation expenses are more than the limit, the

or other financial institutions for which you

excess can be carried forward and deducted

received a Form 1098 (or similar state-

in later tax years. However, the amount

ment). If you did not receive a Form 1098,

Line 18

deductible for any 1 year cannot exceed the

enter the interest on line 23b.

25% gross income limit for that year.

If you use the cash method, you cannot

If you paid more mortgage interest than

deduct when paid the cost of feed your

For details, see Pub. 225.

is shown on Form 1098, see Pub. 535 to

livestock will consume in a later year un-

find out if you can deduct the additional

less all of the following apply.

interest. If you can, include the amount on

•

The payment was for the purchase of

line 23a. Attach a statement to your return

Line 15

feed rather than a deposit.

explaining the difference and enter “See

•

Enter amounts paid for custom hire or ma-

attached” in the margin next to line 23a.

The prepayment had a business pur-

chine work (the machine operator fur-

pose and was not made merely to avoid tax.

If you and at least one other person

nished the equipment).

•

Deducting the prepayment will not

(other than your spouse if you file a joint

Do not include amounts paid for rental

materially distort your income.

return) were liable for and paid interest on

or lease of equipment that you operated

the mortgage and the other person received

yourself. Instead, report those amounts on

If all of the above apply, you can deduct

the Form 1098, include your share of the

line 26a.

the prepaid feed when paid, subject to the

interest on line 23b. Attach a statement to

overall limit for Prepaid farm supplies ex-

your return showing the name and address

plained on page F-4. If all of the above do

of the person who received the Form 1098.

not apply, you can deduct the prepaid feed

In the margin next to line 23b, enter “See

Line 16

only in the year it is consumed.

attached.”

You can deduct depreciation of buildings,

Do not deduct interest you prepaid in

improvements, cars and trucks, machinery,

2007 for later years; include only the part

and other farm equipment of a permanent

Line 20

that applies to 2007.

nature.

Do not include the cost of transportation

Do not deduct depreciation on your

incurred in purchasing livestock held for

home, furniture or other personal items,

Line 24

resale as freight paid. Instead, add these

land, livestock you bought or raised for re-

costs to the cost of the livestock, and deduct

sale, or other property in your inventory.

Enter the amounts you paid for farm labor.

them when the livestock is sold.

Do not include amounts paid to yourself.

You can also elect under section 179 to

Reduce your deduction by the amounts

expense a portion of the cost of certain

claimed on:

property you bought in 2007 for use in your

Line 22

•

farming business. The section 179 election

Form 5884, Work Opportunity Credit,

is made on Form 4562.

line 2;

Deduct on this line premiums paid for farm

•

Form 8844, Empowerment Zone and

For information about depreciation and

business insurance. Deduct on line 17

Renewal Community Employment Credit,

the section 179 deduction, see Pub. 946.

amounts paid for employee accident and

line 2;

health insurance. Amounts credited to a re-

For details on the increased depreciation

•

serve for self-insurance or premiums paid

Form 8845, Indian Employment

and section 179 deductions for qualified

for a policy that pays for your lost earnings

Credit, line 4; and

property in the GO Zone, see Pub. 225.

due to sickness or disability are not deduct-

•

Form 8861, Welfare-to-Work Credit,

See the Instructions for Form 4562 for

ible.

line 2.

information on when you must complete

and attach Form 4562.

Include the cost of boarding farm labor

but not the value of any products they used

Lines 23a and 23b

from the farm. Include only what you paid

household help to care for farm laborers.

Line 17

Interest allocation rules.

The tax treatment

of interest expense differs depending on its

If you provided taxable fringe

Deduct contributions to employee benefit

type. For example, home mortgage interest

benefits to your employees,

programs that are not an incidental part of a

and investment interest are treated differ-

such as personal use of a car, do

pension or profit-sharing plan included on

ently. “Interest allocation” rules require

not include in farm labor the

line 25. Examples are accident and health

you to allocate (classify) your interest ex-

amounts you depreciated or deducted else-

plans, group-term life insurance, and de-

pense so it is deducted on the correct line of

where.

pendent care assistance programs. If you

your return and receives the right tax treat-

made contributions on your behalf as a

ment. These rules could affect how much

self-employed person to a dependent care

interest you are allowed to deduct on

assistance program, complete Form 2441,

Line 25

Schedule F.

Parts I and III, to figure your deductible

Enter your deduction for contributions to

contributions to that program.

Generally, you allocate interest expense

employee pension, profit-sharing, or annu-

Contributions you made on your behalf

by tracing how the proceeds of the loan are

ity plans. If the plan included you as a

as a self-employed person to an accident

used. See Pub. 535 for details.

self-employed person, enter contributions

and health plan or for group-term life insur-

made as an employer on your behalf on

ance are not deductible on Schedule F.

If you paid interest on a debt secured by

Form 1040, line 28 (or on Form 1040NR,

However, you may be able to deduct on

your main home and any of the proceeds

line 27), not on Schedule F.

Form 1040, line 29 (or on Form 1040NR,

from that debt were used in your farming

line 28), the amount you paid for health

business, see Pub. 535 to figure the amount

Generally, you must file the applicable

insurance on behalf of yourself, your

to include on lines 23a and 23b.

form listed below if you maintain a pen-

F-5

Instructions For Schedule F - Profit Or Loss From Farming- 2007 Page 5

Related Articles

Related forms

Related Categories