Instructions For Schedule F - Profit Or Loss From Farming

located. If no plan exists, the expenses must

line 28), the amount you paid for health

Line 12

be consistent with a plan of a comparable

insurance on behalf of yourself, your

state agency. You cannot deduct the ex-

spouse, and dependents even if you do not

You can deduct the actual expenses of op-

penses if they were paid or incurred for

itemize your deductions. See the instruc-

erating your car or truck or take the stan-

land used in farming in a foreign country.

tions for Form 1040, line 29, or Form

dard mileage rate. You must use actual

1040NR, line 28, for details.

expenses if you used your vehicle for hire

Do not deduct expenses you paid or in-

or you used five or more vehicles simulta-

curred to drain or fill wetlands, or to pre-

neously in your farming business (such as

pare land for center pivot irrigation

in fleet operations). You cannot use actual

Line 18

systems.

expenses for a leased vehicle if you previ-

Your deduction cannot exceed 25% of

If you use the cash method, you cannot

ously used the standard mileage rate for

your gross income from farming (exclud-

deduct when paid the cost of feed your

that vehicle.

ing certain gains from selling assets such as

livestock will consume in a later year un-

You can take the standard mileage rate

farm machinery and land). If your conser-

less all of the following apply.

for 2009 only if you:

•

vation expenses are more than the limit, the

The payment was for the purchase of

•

excess can be carried forward and deducted

Owned the vehicle and used the stan-

feed rather than a deposit.

in later tax years. However, the amount

dard mileage rate for the first year you

•

The prepayment had a business pur-

deductible for any 1 year cannot exceed the

placed the vehicle in service, or

pose and was not made merely to avoid tax.

•

25% gross income limit for that year.

Leased the vehicle and are using the

•

Deducting the prepayment will not

standard mileage rate for the entire lease

For details, see chapter 5 of Pub. 225.

materially distort your income.

period (except the period, if any, before

1998).

If all of the above apply, you can deduct

the prepaid feed when paid, subject to the

If you take the standard mileage rate:

Line 15

overall limit for Prepaid farm supplies ex-

•

Multiply the number of business miles

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

Enter amounts paid for custom hire or ma-

driven by 55 cents, and

not apply, you can deduct the prepaid feed

chine work (the machine operator fur-

•

Add to this amount your parking fees

only in the year it is consumed.

nished the equipment).

and tolls, and enter the total on line 12.

Do not include amounts paid for rental

Do not deduct depreciation, rent or lease

or lease of equipment that you operated

payments, or your actual operating ex-

Line 20

yourself. Instead, report those amounts on

penses.

line 26a.

Do not include the cost of transportation

If you deduct actual expenses:

incurred in purchasing livestock held for

•

Include on line 12 the business portion

resale as freight paid. Instead, add these

Line 16

of expenses for gasoline, oil, repairs, insur-

costs to the cost of the livestock, and deduct

ance, tires, license plates, etc., and

them when the livestock is sold.

You can deduct depreciation of buildings,

•

Show depreciation on line 16 and rent

improvements, cars and trucks, machinery,

or lease payments on line 26a.

and other farm equipment of a permanent

Line 22

nature.

If you claim any car or truck expenses

(actual or the standard mileage rate), you

Do not deduct depreciation on your

Deduct on this line premiums paid for farm

must provide the information requested on

home, furniture or other personal items,

business insurance. Deduct on line 17

Form 4562, Part V. Be sure to attach Form

land, livestock you bought or raised for re-

amounts paid for employee accident and

4562 to your return.

sale, or other property in your inventory.

health insurance. Amounts credited to a re-

serve for self-insurance or premiums paid

For details, see chapter 4 of Pub. 463.

You can also elect under section 179 to

for a policy that pays for your lost earnings

expense a portion of the cost of certain

due to sickness or disability are not deduct-

property you bought in 2009 for use in your

ible. For details, see chapter 6 of Pub. 535.

Line 14

farming business. The section 179 election

is made on Form 4562.

Deductible conservation expenses gener-

For information about depreciation and

ally are those that are paid to conserve soil

Lines 23a and 23b

the section 179 deduction, see chapter 7 of

and water for land used in farming, to pre-

Pub. 225. For details on the special depreci-

vent erosion of land used for farming, or for

The tax treatment

Interest allocation rules.

ation allowance, see chapter 3 of Pub. 946.

endangered species recovery. These ex-

of interest expense differs depending on its

penses include (but are not limited to) costs

type. For example, home mortgage interest

See the Instructions for Form 4562 for

for the following.

and investment interest are treated differ-

information on when you must complete

•

ently. “Interest allocation” rules require

and attach Form 4562.

The treatment or movement of earth,

you to allocate (classify) your interest ex-

such as leveling, grading, conditioning, ter-

pense so it is deducted (or capitalized) on

racing, contour furrowing, and the restora-

the correct line of your return and receives

tion of soil fertility.

Line 17

•

the right tax treatment. These rules could

The construction, control, and protec-

affect how much interest you are allowed to

Deduct contributions to employee benefit

tion of diversion channels, drainage

deduct on Schedule F.

programs that are not an incidental part of a

ditches, irrigation ditches, earthen dams,

pension or profit-sharing plan included on

watercourses, outlets, and ponds.

Generally, you allocate interest expense

line 25. Examples are accident and health

•

by tracing how the proceeds of the loan are

The eradication of brush.

plans, group-term life insurance, and de-

•

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

The planting of windbreaks.

pendent care assistance programs. If you

•

If you paid interest on a debt secured by

The achievement of site-specific man-

made contributions on your behalf as a

your main home and any of the proceeds

agement actions recommended in recovery

self-employed person to a dependent care

from that debt were used in your farming

plans approved pursuant to the Endangered

assistance program, complete Form 2441,

business, see chapter 4 of Pub. 535 to figure

Species Act of 1973.

Parts I and III, to figure your deductible

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

contributions to that program.

These expenses can be deducted only if

they are consistent with a conservation plan

Contributions you made on your behalf

How to report.

If you have a mortgage on

approved by the Natural Resources Conser-

as a self-employed person to an accident

real property used in your farming business

vation Service of the Department of Agri-

and health plan or for group-term life insur-

(other than your main home), enter on line

culture or a recovery plan approved

ance are not deductible on Schedule F.

23a the interest you paid for 2009 to banks

pursuant to the Endangered Species Act of

However, you may be able to deduct on

or other financial institutions for which you

1973, for the area in which your land is

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

received a Form 1098 (or similar state-

F-5

Instructions For Schedule F - Profit Or Loss From Farming - 2009 Page 5

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