Instructions For Pa Schedule F Farm Income And Expenses Form Pa-40 F 2008 (Page 2 of 2) in pdf

PA Schedule F

Farm Income and Expenses

PA-40 F (09–08) (I)

PA DEPARTMENT OF REVENUE

Part I. Farm Income – Cash Method – Complete Parts I and II

farm business must use the insurance proceeds to continue its

operations. If deducting insurance premiums, proceeds received

Line 5a. and 5b.

On Line 5a, show your total distributions from

are business income on Line 11 of Part I.

cooperatives, including patronage dividends, nonpatronage distri-

Line 23. Labor hired.

You do not have to reduce your wage

butions, per-unit retain allocations and redemption of nonqualified

expense for any federal credits you claim. Add back any wage

notices and per-unit allocations.

expenses you excluded in order to claim a federal credit. Do not

Show patronage dividends (distributions) received in cash and the

deduct the costs of your own participation.

dollar amount of qualified written notices of allocation. If you

Line 27. Other interest.

Do not deduct personal interest. If you

received property as patronage dividends, report the fair market

personally borrow money to acquire a farm or farm interest or to

value of the property as income.

improve your farm, you may not deduct the interest on any PA

On Line 5b, enter patronage dividends from buying personal or

schedule or PA tax return. If the farm business itself incurs debt, the

family items, capital assets or depreciable assets.

farm business may deduct the interest expense.

Line 11. Other Income.

Enter gross proceeds you may have to

Line 34. Taxes.

You may deduct tax expenses other than taxes

report elsewhere on your federal tax return. Include the income from

based on income. You may not deduct taxes based on net income,

the sale of business assets you reinvested and used to acquire sim-

federal income taxes and one-half of the self-employment taxes

ilar business assets. Also include the gain or loss on replacing busi-

that the IRS allows. You may not deduct taxes paid to other states

ness property (including land or buildings used by the facility in the

or foreign countries based on income. You may not deduct estate

operation of a farm) and interest and dividend income from invest-

taxes and inheritance, legacy, succession and gift taxes.

ments that generated working capital. Include other income as

Assessments for betterments and improvements are not allowable.

described for Line 10 of Federal Schedule F. PA PIT law and regu-

Line 37. Other expenses.

You may deduct any other cost of

lations do not have limitations on depreciation when business prop-

operations that are ordinary, necessary, reasonable and current

erty use (or the inclusion amount on leased property adjustment)

expenses of your farm business.

falls below 50 percent. You may deduct the allowable business

depreciation as described below on such property. You do not report

• You may deduct 100 percent of the sales tax paid on a depre-

"depreciation recapture" for PA Personal Income Tax purposes.

ciable asset. However, on disposition, your Pennsylvania basis

and federal basis for that asset will be different.

Part II. Farm Deductions – Cash and Accrual Method

• You may deduct charitable contributions made from your farm

Include only those current expenses that are ordinary, necessary

account and acknowledged publicly by the recipient. Personal

and reasonable for producing farming income. Do not include per-

charitable contributions are not allowable.

sonal or living expenses. PA law does not impose dollar or per-

centage limitations on allowable expenses. You may always

• You may use the capitalization rules established by your industry,

deduct 100 percent of the PA allowable farm expenses that you

under its generally accepted accounting principles and practices.

incurred during the taxable year.

Once elected, you must consistently use this method.

Line 16a. Regular Depreciation.

• You may deduct 100 percent of expenses for removing barriers

You may use any depreciation

to individuals with disabilities and the elderly. You may not take

method that is permissable under accepted accounting principles

the federal credit.

and practices but you may not change your method once you select

a method.

• You may deduct home office expenses. Pennsylvania generally

follows the federal rules for a home office. Itemize any other

Note:

PA PIT law does not permit the bonus depreciation elections

expenses that are allowable under GAAP or FASB rules but are

added to the Internal Revenue Code (IRC) in 2002 and 2003.

not allowable or limited under federal rules.

For each asset, you must also report straight-line depreciation,

Line 39.

Enter expenses you incurred that qualified you to take a

unless not using an optional accelerated depreciation method. The

credit on your PA-40, PA Schedule OC for the PA Employment

straight-line depreciation is needed in order to take advantage of

Incentive Payments Tax Credit, PA Jobs Creation Tax Credit, and/or

Pennsylvania’s Tax Benefit Rule when you sell the asset.

the PA Research and Development Tax Credit. You cannot take

Line 16b. Section 179 expense.

Current expensing is limited

these expenses and also receive the credit on your PA-40.

to the expensing allowed at the time you placed the asset into

Line 45. Other Income.

Enter transactions you may have to

service or the expensing in effect under the IRC of 1986 as

report elsewhere on your federal tax return, such as the sale of

amended Jan. 1, 1997. Pennsylvania follows the federal defini-

business assets, gain or loss on replacing business property

tions for listed property.

(other than land or buildings) and income from short-term invest-

Line 17. Employee benefit programs other than on Line 28.

ments to generate working capital. Include other income as

You may not deduct any payments you make for your own person-

described for Line 44 of Federal Schedule F. However, PA laws

al coverage.

and regulations do not have limitations on depreciation as

Line 22. Insurance.

You may deduct life insurance on yourself

described above when farming property use (or the inclusion

or your spouse only if the farm business itself (not your spouse,

amount on leased property adjustment) falls below 50 percent.

other family members or other persons) is the beneficiary. The

Deduct the allowable business depreciation on such property.

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Instructions For Pa Schedule F Farm Income And Expenses Form Pa-40 F 2008 Page 2

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