Filing taxes can feel like trying to plow through rocky soil — especially if you’re a farmer. Between unpredictable weather, fluctuating crop prices, and changing tax laws, farmers face unique financial challenges. That’s where Schedule F comes in. For 2025, understanding Schedule F is more important than ever to ensure you claim every deduction you deserve while staying compliant with IRS rules.
In this guide, we break down Schedule F for 2025 in simple, farmer-friendly terms. Whether you grow corn in Iowa or raise cattle in Texas, this guide is here to help you file with confidence.
Why Schedule F Matters for Farmers
Schedule F is the IRS tax form specifically designed for reporting income and expenses from farming. It helps you calculate your farm’s profit or loss, which flows directly into your Form 1040 (your individual income tax return).
Using Schedule F allows farmers to:
- Deduct qualified farming expenses
- Report income from selling livestock, produce, grains, and other products
- Reduce taxable income legally
- Stay compliant with IRS regulations
Simply put, if you’re engaged in farming as a business, not just a hobby, Schedule F is your best friend during tax season.
Who Needs to File Schedule F in 2025?
You should file Schedule F if:
- You operate a farm for profit, whether full-time or part-time
- You raise and sell livestock, poultry, fish, or produce
- You lease farmland and receive income from it
- You engage in agricultural production activities
Note: If you’re farming only as a hobby, you typically can’t deduct expenses on Schedule F. The IRS has strict rules to differentiate between a business and a hobby.
What’s New for Schedule F in 2025?
While the core structure of Schedule F remains, 2025 includes a few updates farmers need to know:
- Increased standard mileage rates: Farmers using vehicles for farm work may benefit from higher mileage deductions.
- Expanded bonus depreciation phase-out: 2025 begins the gradual reduction of 100% bonus depreciation to 80% — plan large equipment purchases accordingly.
- Updated Section 179 limits: Farmers can still fully deduct certain equipment, but new caps may apply.
- Possible disaster relief provisions: Due to recent extreme weather, some farmers may qualify for additional credits or extensions. Always check IRS updates or consult a tax pro.
Breaking Down Schedule F: Line-by-Line
Part I – Farm Income
This section covers all income generated by your farming operation:
- Sale of livestock, produce, grains, and other products
- Cooperative distributions
- Agricultural program payments
- Custom hire (machine work income)
- Crop insurance proceeds
- Other farming income (rental, breeding fees, etc.)
Part II – Farm Expenses
Here’s where the real savings happen. You can deduct:
- Feed, seed, and fertilizer
- Labor hired (wages, payroll taxes)
- Freight and trucking
- Repairs and maintenance
- Depreciation on equipment
- Gasoline, fuel, and oil
- Veterinary and breeding costs
- Insurance (other than health)
- Interest on farm loans
Important: Always keep detailed records to back up your deductions.
Part III – Farm Profit or Loss
This section subtracts total expenses from total income to determine your net farm profit or loss, which flows to your Form 1040.
What Counts as Farm Income?
Farm income can come from many different sources, and the IRS expects you to report all of them. Common sources include the sale of crops such as corn, soybeans, wheat, and vegetables. Livestock sales, whether you’re selling cattle, pigs, poultry, or other animals, also count as farm income.
In addition, many farmers receive payments from agricultural programs run by the USDA or state governments. These government subsidies are considered taxable income. You must also report payments from crop insurance, custom hire income earned by performing farm services with your equipment, and any cooperative distributions or patronage dividends received. Even barter transactions — such as trading farm products or services — must be included.
Failing to report any of these income sources can trigger audits or penalties, so it’s essential to keep complete records and report your full income accurately.
What Farm Expenses Are Deductible?
The beauty of Schedule F is that it allows farmers to deduct a wide range of business expenses that directly relate to their farming operation. These deductions lower your taxable income and can make a significant difference in your tax bill.
Feed and Supplies
Feed for livestock and supplies like fencing, seeds, plants, and small equipment are all deductible if they are directly used for the farming business.
Fertilizer, Lime, and Chemicals
Expenses for fertilizing fields, balancing soil pH, and applying pesticides or herbicides are fully deductible.
Labor and Contract Work
Payments to employees (W-2 wages) and independent contractors (1099-NEC) qualify as deductible expenses, provided proper records are kept and forms are filed.
Repairs and Maintenance
The cost to maintain and repair farm machinery, vehicles, irrigation systems, and buildings used in farming is deductible.
Fuel and Utilities
Diesel, gasoline, electricity, propane, and water used for farm operations are deductible as well. If a portion of utilities is for personal use (like a home office or residence), you must separate personal from business use.
Insurance, Mortgage Interest, and Property Taxes
Insurance premiums for farm property and liability coverage, mortgage interest on farm property loans, and state and local property taxes on farmland are fully deductible.
Veterinary and Breeding Costs
If you raise animals for profit, veterinary care, breeding fees, and medication expenses are all deductible.
Conservation Expenses
Costs incurred to protect soil and water resources, such as erosion control projects, may also be deductible under specific IRS rules.
Other Deductions
Many farmers overlook additional deductible items like accounting fees, legal fees, tax preparation costs, subscriptions to farm journals, and farm management software.
How to File Schedule F in 2025
Farmers can file Schedule F electronically using tax software or through a tax professional. Paper filings are also accepted but may take longer to process. Always attach any required supporting forms such as:
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Form 4562 for depreciation
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Form 1099-NEC for contract labor payments
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Form W-2 for hired employees
Because Schedule F involves numerous moving parts, many farmers choose to work with tax professionals who specialize in agriculture.
Common Mistakes Farmers Make on Schedule F
Even experienced farmers can stumble on tax forms. Here are some mistakes to avoid:
- Mixing personal and business expenses
- Missing available deductions (don’t forget depreciation!)
- Incorrectly reporting crop insurance proceeds
- Failing to report barter income (yes, it’s taxable!)
- Not consulting a tax professional for complex issues
Pro Tax Tips for Farmers in 2025
- Track everything: Use farm management software or hire a bookkeeper.
- Understand depreciation: Take advantage of Section 179 and bonus depreciation while you can.
- Plan equipment purchases wisely: The depreciation rules are phasing out over the next few years.
- Know disaster relief options: Weather events may provide special IRS relief.
- Consider estimated payments: To avoid underpayment penalties, pay quarterly taxes if required.
Self-Employment Tax and Other Tax Obligations
Farming income isn’t just subject to regular income tax; you must also pay self-employment tax, which funds Social Security and Medicare. The self-employment tax rate for 2025 remains at 15.3%.
If you expect to owe more than $1,000 in tax for the year, you may also be required to make estimated quarterly tax payments to avoid penalties.
In addition, if you employ workers, you’re responsible for employment taxes, withholding income taxes, and submitting the correct forms to the IRS. Certain fuel purchases and heavy equipment use may also trigger federal excise taxes.
Summary: Don’t Leave Money in the Fields
Filing Schedule F correctly can mean big savings for your farming business. With careful recordkeeping, attention to detail, and an understanding of the 2025 tax changes, you can plow through tax season without worry. And remember: when in doubt, always seek professional tax help to ensure you’re maximizing your deductions while staying fully compliant with IRS rules.
Need Help With Back Taxes?
Contact a tax specialist today to explore how to reduce, resolve, or eliminate your back taxes with the IRS Fresh Start Program.
For more information or assistance, click here or call us directly at (800) 607-7565 for immediate support.
