Instructions For Schedule F - Profit Or Loss From Farming

Do not deduct expenses you paid or in-

spouse, and dependents even if you do not

Line 12

curred to drain or fill wetlands, or to pre-

itemize your deductions. See the instruc-

pare land for center pivot irrigation

tions for Form 1040, line 29, or Form

You can deduct the actual expenses of op-

systems.

1040NR, line 28, for details.

erating your car or truck or take the stan-

dard mileage rate. You must use actual

Your deduction cannot exceed 25% of

expenses if you used your vehicle for hire

your gross income from farming (exclud-

or you used five or more vehicles simulta-

Line 18

ing certain gains from selling assets such as

neously in your farming business (such as

farm machinery and land). If your conser-

If you use the cash method, you cannot

in fleet operations). You cannot use actual

vation expenses are more than the limit, the

deduct when paid the cost of feed your

expenses for a leased vehicle if you previ-

excess can be carried forward and deducted

livestock will consume in a later year un-

ously used the standard mileage rate for

in later tax years. However, the amount

less all of the following apply.

that vehicle.

deductible for any 1 year cannot exceed the

•

The payment was for the purchase of

25% gross income limit for that year.

You can take the standard mileage rate

feed rather than a deposit.

for 2008 only if you:

For details, see chapter 5 of Pub. 225.

•

The prepayment had a business pur-

•

Owned the vehicle and used the stan-

pose and was not made merely to avoid tax.

dard mileage rate for the first year you

•

Deducting the prepayment will not

placed the vehicle in service, or

Line 15

materially distort your income.

•

Leased the vehicle and are using the

Enter amounts paid for custom hire or ma-

standard mileage rate for the entire lease

If all of the above apply, you can deduct

chine work (the machine operator fur-

period (except the period, if any, before

the prepaid feed when paid, subject to the

nished the equipment).

overall limit for Prepaid farm supplies ex-

1998).

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

Do not include amounts paid for rental

If you take the standard mileage rate,

not apply, you can deduct the prepaid feed

or lease of equipment that you operated

multiply the number of business miles

only in the year it is consumed.

yourself. Instead, report those amounts on

driven:

line 26a.

•

Before July 1, 2008, by 50.5 cents,

and

Line 20

•

After June 30, 2008, by 58.5 cents.

Line 16

Add to this amount your parking fees and

Do not include the cost of transportation

tolls, and enter the total on line 12. Do not

incurred in purchasing livestock held for

You can deduct depreciation of buildings,

deduct depreciation, rent or lease pay-

resale as freight paid. Instead, add these

improvements, cars and trucks, machinery,

ments, or your actual operating expenses.

costs to the cost of the livestock, and deduct

and other farm equipment of a permanent

them when the livestock is sold.

nature.

If you deduct actual expenses:

•

Do not deduct depreciation on your

Include on line 12 the business portion

home, furniture or other personal items,

of expenses for gasoline, oil, repairs, insur-

Line 22

land, livestock you bought or raised for re-

ance, tires, license plates, etc., and

•

sale, or other property in your inventory.

Show depreciation on line 16 and rent

Deduct on this line premiums paid for farm

You can also elect under section 179 to

or lease payments on line 26a.

business insurance. Deduct on line 17

expense a portion of the cost of certain

amounts paid for employee accident and

If you claim any car or truck expenses

property you bought in 2008 for use in your

health insurance. Amounts credited to a re-

(actual or the standard mileage rate), you

farming business. The section 179 election

serve for self-insurance or premiums paid

must provide the information requested on

is made on Form 4562.

for a policy that pays for your lost earnings

Form 4562, Part V. Be sure to attach Form

due to sickness or disability are not deduct-

For information about depreciation and

4562 to your return.

ible.

the section 179 deduction, see chapter 7 of

For details, see Pub. 463.

Pub. 225.

For details on the special depreciation

Lines 23a and 23b

allowance and section 179 deduction for

Line 14

qualified property in the GO Zone, see

Interest allocation rules.

The tax treatment

chapter 3 of Pub. 946.

of interest expense differs depending on its

Deductible soil and water conservation ex-

type. For example, home mortgage interest

penses generally are those that are paid to

See the Instructions for Form 4562 for

and investment interest are treated differ-

conserve soil and water or to prevent ero-

information on when you must complete

ently. “Interest allocation” rules require

sion of land used for farming. These ex-

and attach Form 4562.

you to allocate (classify) your interest ex-

penses include (but are not limited to) costs

pense so it is deducted on the correct line of

for the following.

•

your return and receives the right tax treat-

The treatment or movement of earth,

Line 17

ment. These rules could affect how much

such as leveling, grading, conditioning, ter-

interest you are allowed to deduct on

Deduct contributions to employee benefit

racing, contour furrowing, and the restora-

Schedule F.

programs that are not an incidental part of a

tion of soil fertility.

•

pension or profit-sharing plan included on

The construction, control, and protec-

Generally, you allocate interest expense

line 25. Examples are accident and health

by tracing how the proceeds of the loan are

tion of diversion channels, drainage

plans, group-term life insurance, and de-

used. See chapter 4 of Pub. 535 for details.

ditches, irrigation ditches, earthen dams,

pendent care assistance programs. If you

watercourses, outlets, and ponds.

If you paid interest on a debt secured by

made contributions on your behalf as a

•

The eradication of brush.

your main home and any of the proceeds

self-employed person to a dependent care

•

from that debt were used in your farming

The planting of windbreaks.

assistance program, complete Form 2441,

business, see chapter 4 of Pub. 535 to figure

Parts I and III, to figure your deductible

These expenses can be deducted only if

the amount to include on lines 23a and 23b.

contributions to that program.

they are consistent with a conservation plan

approved by the Natural Resources Conser-

Contributions you made on your behalf

If you have a mortgage on

How to report.

vation Service of the Department of Agri-

as a self-employed person to an accident

real property used in your farming business

culture for the area in which your land is

and health plan or for group-term life insur-

(other than your main home), enter on line

located. If no plan exists, the expenses must

ance are not deductible on Schedule F.

23a the interest you paid for 2008 to banks

be consistent with a plan of a comparable

However, you may be able to deduct on

or other financial institutions for which you

state agency. You cannot deduct the ex-

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

received a Form 1098 (or similar state-

penses if they were paid or incurred for

line 28), the amount you paid for health

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

land used in farming in a foreign country.

insurance on behalf of yourself, your

enter the interest on line 23b.

F-5

Instructions For Schedule F - Profit Or Loss From Farming - 2008 Page 5

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