Instructions for Schedule F

2025

Instructions for Schedule F

(Form 1040)

Profit or Loss From Farming

Section references are to the Internal Revenue Code unless

otherwise noted.

Future Developments

For the latest information about developments related to

Schedule F (Form 1040) and its instructions, such as legislation

enacted after they were published, go to IRS.gov/ScheduleF.

What’s New

Standard mileage rate. The business standard mileage rate is

70 cents a mile for 2025.

Bonus depreciation. The 100% special depreciation

allowance is restored for qualified property acquired after

January 19, 2025. However, property put into service between

January 1, 2025, and January 19, 2025, or acquired before

January 20, 2025, and put into service later will remain subject to

the phase-down rules under prior law. For more information, see

Form 4562, Depreciation and Amortization, and its instructions.

Increased section 179 deduction dollar limits. For tax years

beginning in 2025, the maximum section 179 expense deduction

is $2,500,000. This amount is reduced by the amount by which

the cost of section 179 property placed in service during the year

exceeds $4,000,000.

Business interest expense limitation. The business interest

expense in your farming activity may be limited. For tax years

beginning in 2025, the calculation of adjusted taxable income

includes a requirement to add back to taxable income the

deductions for depreciation, amortization, and depletion to arrive

at the amount that is used to determine if your interest expense

is limited. For more information, see Form 8990, Limitation on

Business Interest Expense Under Section 163(j), and its

instructions.

No tax on car loan interest. If you are self-employed and use

your vehicle for personal and business use, you may be eligible

to take a deduction for the interest for the personal use on

Schedule 1-A (Form 1040). You can only deduct the part of the

interest expense that represents the business use of your vehicle

in the farming activity on Schedule F (Form 1040). See the

Instructions for Schedule 1-A (Form 1040) for more information.

Election to pay tax on farmland sale or exchange in installments. P.L. 119-21, commonly known as the One Big Beautiful

Bill Act, created a new section 1062 that allows taxpayers to

elect to pay the net income tax attributable to the gain on the

sale or exchange of qualified farmland property to a qualified

farmer through four equal annual installments beginning in the

year of sale or exchange. This election is available for tax years

beginning after July 4, 2025. For more information, see section

1062 and the new Form 1062 when it becomes available.

Expansion of tax relief in disaster situations. The eligibility

and filing procedures for claiming a personal casualty loss as a

result of a disaster have been expanded. For more information,

see Pub. 225, Farmer’s Tax Guide, and Pub. 547, Casualties,

Disasters, and Thefts.

Dec 10, 2025

Reminders

Farmers and ranchers affected by drought may be eligible

for extension of tax relief. Farmers and ranchers forced to sell

certain livestock because of drought conditions may have more

time to replace their livestock and defer tax on any gains from

the forced sales. See IRS extends relief to farmers and ranchers

in 49 states and other areas.

Form 1040-SS, Part III, has been replaced. Schedule F

(Form 1040) is now filed with Form 1040-SS, if applicable. For

additional information, see the Instructions for Form 1040-SS.

Excess business loss limitation rules. The limitation on

excess business losses for noncorporate taxpayers is applicable

for 2025. See Form 461, Limitation on Business Losses, and its

instructions for details on the amount of the excess business loss

limitation.

Form 7205, Energy Efficient Commercial Buildings Deduction. This form and its separate instructions are used to claim

the section 179D deduction for qualifying energy efficient

commercial building expenses.

Deduction for qualified business income. For tax years

beginning after 2017, you may be entitled to a deduction of up to

20% of your qualified business income from your qualified trade

or business, plus 20% of the aggregate amount of qualified real

estate investment trust (REIT) dividends and qualified publicly

traded partnership (PTP) income. The deduction is subject to

various limitations, such as limitations based on your type of

trade or business, your taxable income, the amount of W-2

wages paid with respect to the trade or business, and the

unadjusted basis immediately after acquisition of qualified

property held by the trade or business.

Special rules also exist for patrons of specified agricultural or

horticultural cooperatives, including the following.

• Distributions from a cooperative that are included in a patron’s

qualified business income and are identified on Form

1099-PATR as qualified payments are subject to the patron

reduction.

• A cooperative’s section 199A(g) deduction passed through to

a patron on the Form 1099-PATR is included in the patron’s

qualified business income deduction.

You will claim the deduction for qualified business income on

Form 1040 or 1040-SR. This deduction can be taken in addition

to the standard or itemized deductions. For more information,

see the Instructions for Form 1040 and Pub. 334, Tax Guide for

Small Business.

Form 172. Form 172, Net Operating Losses (NOLs) for

Individuals, Estates, and Trusts, is a new form for figuring net

operating losses (NOLs). This form replaces Schedules A and B

(Form 1045).

Net operating loss (NOL). An NOL can no longer be carried

back, unless the NOL is a farming loss. If you have an NOL

attributable to farming, you must carry it back to each of the 2 tax

years preceding the tax year of the loss, unless you elect to forgo

the carryback. Farming businesses can elect to forgo the

carryback and carry forward the farm NOL to a later year. For

additional information on NOLs for individuals, estates and

Instructions for Schedule F (Form 1040) (2025) Catalog Number 17152R

Department of the Treasury Internal Revenue Service www.irs.gov

trusts, and corporations, see Pub. 225 and Form 172 and its

instructions.

Small business taxpayers. For tax years beginning after 2017,

more small business taxpayers may be eligible to use the cash

method of accounting. See Small business taxpayer, later.

General Instructions

Use Schedule F (Form 1040) to report farm income and

expenses. File it with Form 1040, 1040-SR, 1040-SS, 1040-NR,

1041, or 1065.

Your farming activity may subject you to state and local taxes

and other requirements such as business licenses and fees.

Check with your state and local governments for more

information.

Additional information. Pub. 225 has more information and

examples to help you complete your farm tax return. It also lists

important dates that apply to farmers.

Other Schedules and Forms You May

Have To File

• Schedule E (Form 1040), Part I, to report rental income from

pastureland based on a flat charge, and to report farm rental

income and expenses of a trust or estate based on crops or

livestock produced by a tenant. However, report pasture income

received from taking care of someone else’s livestock on

Schedule F (Form 1040), line 8.

• Schedule J (Form 1040) to figure your tax by averaging your

farm income over the previous 3 years. Doing so may reduce

your tax.

• Schedule SE (Form 1040) to pay self-employment tax on

income from your farming business.

• Form 172 to figure the net operating loss (NOL).

• Form 461 to figure excess business loss.

• Form 3800 to claim any general business credits.

• Form 4562 to claim depreciation (including the special

allowance) on assets placed in service in 2025, to claim

amortization that began in 2025, to make an election under

section 179 to expense certain property, or to report information

on vehicles and other listed property.

• Form 4684 to report a casualty or theft gain or loss involving

farm business property, including purchased livestock held for

draft, breeding, sport, or dairy purposes. See Pub. 225 for more

information on how to report various farm losses, such as losses

due to death of livestock or damage to crops or other farm

property.

• Form 4797 to report sales, exchanges, or involuntary

conversions (other than from a casualty or theft) of certain farm

property. Also, use this form to report sales of livestock held for

draft, breeding, sport, or dairy purposes.

• Form 4835 to report rental income based on crop or livestock

shares produced by a tenant if you didn’t materially participate in

the management or operation of a farm. This income isn’t

subject to self-employment tax. See Pub. 225.

• Form 6198 to figure your allowable loss if you have a business

loss and you have amounts invested in the business for which

you aren’t at risk.

• Form 7205 to claim the section 179D deduction for a

qualifying energy efficient commercial building.

• Form 8300 to report cash payments over $10,000 received in

a trade or business.

• Form 8582 to figure your allowable loss from passive

activities.

• Form 8824 to report like-kind exchanges of business or

investment property.

• Form 8990 to figure any amount of business interest expense

that is not subject to the interest expense limitation and to figure

the amount you can carry forward. However, a small business

taxpayer is not subject to the business interest expense

limitation and is not required to file Form 8990. Also, certain

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farming businesses and specified agricultural or horticultural

cooperatives can make an election not to have the limitation

apply.

• Form 1045 to request a refund such as resulting from a

carryback loss.

Single-member limited liability company (LLC). Generally, a

single-member domestic LLC isn’t treated as a separate entity

for federal income tax purposes. If you are the sole member of a

domestic LLC engaged in the business of farming, file

Schedule F (Form 1040). However, you can elect to treat a

domestic LLC as a corporation. See Form 8832 for details on the

election.

Heavy highway vehicle use tax. If you use certain highway

trucks, truck-trailers, tractor trailers, or buses in your farming

business, you may have to pay a federal highway motor vehicle

use tax. See the Instructions for Form 2290 to find out if you owe

this tax and go to IRS.gov/Trucker for the latest developments.

Information returns. You may have to file information returns

for wages paid to employees, certain payments of fees and other

nonemployee compensation, interest, rents, royalties, real estate

transactions, annuities, and pensions. For details, see Line F,

later, and the 2025 General Instructions for Certain Information

Returns.

If you received cash of more than $10,000 in one or more

related transactions in your farming business, you may have to

file Form 8300. For details, see Pub. 1544.

Reportable transactions disclosure statement. If you

entered into a reportable transaction in 2025, you must file Form

8886 to disclose certain information, as required by Treas. Reg.

section 1.6011-4 and the Instructions for Form 8886. You may

have to pay a penalty if you are required to file Form 8886 but

don’t do so. You may also have to pay interest and penalties on

any reportable transaction understatements. For more

information on reportable transactions, see the Instructions for

Form 8886.

Farm Owned and Operated by Spouses

If you and your spouse jointly own and operate a farm as an

unincorporated business and share in the profits and losses, you

can file Form 1065 and be treated as a partnership, or you each

can file Schedule F (Form 1040) as a qualified joint venture.

Qualified Joint Venture (QJV)

If you and your spouse each materially participate as the only

members of a jointly owned and operated farm, and you file a

joint return for the tax year, you can elect to be treated as a QJV

instead of a partnership. This election, in most cases, won’t

increase the total tax owed on the joint return, but it does give

each of you credit for social security earnings on which

retirement benefits are based and for Medicare coverage without

filing a partnership return. For an explanation of “material

participation,” see the instructions for Schedule C (Form 1040),

line G; and Line E, later.

Making the election. To make this election, you must divide all

items of income, gain, loss, deduction, and credit attributable to

the farming business between you and your spouse in

accordance with your respective interests in the venture. Each of

you must file a separate Schedule F (Form 1040). On each line

of your separate Schedule F (Form 1040), you must enter your

share of the applicable income, deduction, or loss. Each of you

must also file a separate Schedule SE (Form 1040) to pay

self-employment tax, as applicable.

As long as you remain qualified, your election can’t be

revoked without IRS consent.

For more information on QJVs, go to IRS.gov/QJV.

Exception—Community Income

If you and your spouse wholly own an unincorporated farming

business as community property under the community property

laws of a state, foreign country, or U.S. territory, you can treat

your wholly owned, unincorporated business as a sole

proprietorship, instead of a partnership. Any change in your

reporting position will be treated as a conversion of the entity.

Report your income and deductions as follows.

• If only one spouse participates in the business, all of the

income from that business is the self-employment earnings of

the spouse who carried on the business.

• If both spouses participate, the income and deductions are

allocated to the spouses based on their distributive shares.

• If either or both you and your spouse are partners in a

partnership, see Pub. 541.

• If you and your spouse elected to treat the business as a QJV,

see Qualified Joint Venture (QJV), earlier, for how to report

income and deductions.

States with community property laws include Arizona,

California, Idaho, Louisiana, Nevada, New Mexico, Texas,

Washington, and Wisconsin. See Pub. 555 for more information

about community property laws.

Estimated Tax

If you had to make estimated tax payments for 2025, and you

underpaid your estimated tax, you won’t be charged a penalty if

both of the following apply.

• Your gross farming or fishing income for 2024 or 2025 is at

least two-thirds of your gross income.

• You file your 2025 tax return and pay the tax due by March 2,

2026.

For details and alternative ways to avoid the estimated tax

penalty, see the Instructions for Form 2210-F and chapter 15 of

Pub. 225.

Specific Instructions

Filers of Forms 1041 and 1065. Don’t complete the block

labeled “Social security number (SSN).” Instead, enter the

employer identification number (EIN) issued to the estate, trust,

or partnership on line D.

Line B

On line B, enter one of the 17 principal agricultural activity codes

listed in Part IV on page 2 of Schedule F (Form 1040). Select the

code that best describes the source of most of your income.

Line C

If you use the cash method, check the box for “Cash.” Complete

Schedule F (Form 1040), Parts I and II. In most cases, report

income in the year in which you actually or constructively

received it and deduct expenses in the year you paid them.

However, if the payment of an expenditure creates an intangible

asset (such as a prepaid expense) having a useful life that

extends beyond the earlier of 12 months after the creation of the

benefit or the end of the next tax year, it may not be deductible or

may be deductible only in part for the year of the payment. See

chapter 2 of Pub. 225.

If you use the accrual method, check the box for “Accrual.”

Complete Schedule F (Form 1040), Part I, line 9; Part II; and Part

III. Generally, report income in the year in which you earned it

and deduct expenses in the year you incurred them, even if you

didn’t pay them in that year. Accrual-basis taxpayers are put on a

cash basis for deducting business expenses owed to a related

cash-basis taxpayer. Other rules determine the timing of

deductions based on economic performance. See Pub. 538,

Accounting Periods and Methods.

Farming syndicates. Farming syndicates can’t use the cash

method of accounting. A farming syndicate may be a

partnership, an LLC, an S corporation, or any other enterprise

other than a C corporation if:

• The interests in the business have at any time been offered for

sale in a way that would require registration with any federal or

state agency, or

• More than 35% of the losses during any tax year are allocable

to limited partners or limited entrepreneurs. A limited partner is

one who can lose only the amount invested or required to be

invested in the partnership. A limited entrepreneur is a person

who doesn’t take any active part in managing the business.

Line D

Enter on line D the EIN that was issued to you on Form SS-4.

Don’t enter your SSN. Don’t enter another taxpayer’s EIN (for

example, from any Forms 1099-MISC that you received). If you

don’t have an EIN, leave line D blank.

You need an EIN only if you have a qualified retirement plan

or are required to file employment, excise, alcohol, tobacco, or

firearms returns, or if you are a payer of gambling winnings. If

you need an EIN, see the Instructions for Form SS-4.

Single-member LLCs. If you are a sole owner of an LLC that

isn’t treated as a separate entity for federal income tax purposes,

you may have an EIN that was issued to the LLC (and in the

LLC’s legal name) if you are required to file employment tax

returns and certain excise tax returns. However, you should

enter on line D only the EIN issued to you and in your

name as the sole proprietor of your farming business. If you

don’t have such an EIN, leave line D blank. Don’t enter on line D

the EIN issued to the LLC.

Single-member LLCs with employees. Single-member LLCs

that are disregarded as entities separate from their owners for

federal income tax purposes are required to file employment tax

returns using the LLC’s name and EIN rather than the LLC

owner’s name and EIN. For more information, see the

Instructions for Form SS-4.

Filers of Forms 1041 and 1065. Enter on line D the EIN issued

to the estate, trust, or partnership.

Line E

Material participation. For the definition of “material

participation” for purposes of the passive activity rules, see the

instructions for Schedule C (Form 1040), line G. If you meet any

of the material participation tests described in those instructions,

check the “Yes” box.

If you are a retired or disabled farmer, you are treated as

materially participating in a farming business if you materially

participated 5 or more of the 8 years preceding your retirement

or disability. Also, a surviving spouse is treated as materially

participating in a farming activity if the surviving spouse actively

manages the farm and the real property used for farming meets

the estate tax rules for special valuation of farm property passed

from a qualifying decedent.

Check the “No” box if you didn’t materially participate. If you

checked “No” and you have a loss from this business, see Limit

on passive losses next. If you have a profit from this business

activity but have current-year losses from other passive activities

or prior-year unallowed passive activity losses, see the

Instructions for Form 8582.

Limit on passive losses. If you checked the “No” box and you

have a loss from this business, you may have to use Form 8582

to figure your allowable loss, if any, to enter on Schedule F (Form

1040), line 34. In most cases, you can deduct losses from

passive activities only to the extent of income from passive

activities. For details, see Pub. 925.

Note: Form 1040-SS filers, skip this line.

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received, when calculating gross receipts. (See Understanding

Your 1099-K on IRS.gov.)

Line F

If you made any payments in 2025 that would require you to file

any Forms 1099, check the “Yes” box. Otherwise, check the “No”

box. See the 2025 General Instructions for Certain Information

Returns in Guide to Information Returns if you are unsure

whether you are required to file any Forms 1099. Also, see the

separate specific instructions for each Form 1099.

Note: Form 1040-SS filers, skip this line and line G.

Generally, you must file Form 1099-MISC or Form

TIP 1099-NEC if you paid at least $600 in rents, services,

prizes, medical and health care payments, and other

income payments. See the Guide to Information Returns in the

2025 General Instructions for Certain Information Returns, which

has more information, including the due dates for the various

information returns.

Part I. Farm Income—Cash Method

In Part I, show income received for items listed on lines 1 through

8. In most cases, include both the cash actually or constructively

received and the fair market value (FMV) of goods or other

property received for these items. Income is constructively

received when it’s credited to your account or set aside for you to

use.

If you received rents based on crop shares or farm production

and materially participated in the management or operation of a

farm, report these rents as income on line 2.

Sales of livestock because of weather-related conditions.

If you sold livestock because of drought, flood, or other

weather-related conditions, you can elect to report the income

from the sale in the year after the year of sale if all of the

following apply.

• Your main business is farming.

• You can show that you sold the livestock only because of

weather-related conditions.

• Your area qualified for federal aid.

See chapter 3 of Pub. 225 for details.

Chapter 11 bankruptcy. If you were a debtor in a chapter 11

bankruptcy case during 2025, see Chapter 11 Bankruptcy Cases

in the Instructions for Form 1040 (under Income) and the

Instructions for Schedule SE (Form 1040).

Forms 1099 or CCC-1099-G. If you received Forms 1099 or

CCC-1099-G showing amounts paid to you, first determine if the

amounts are to be included with farm income. Then, use the

following table to determine where to report the income on

Schedule F (Form 1040). Include the Form 1099 or CCC-1099-G

amounts in the total amount reported on that line.

Form

1099-PATR . . . . . . . . . . . . . . . . . . . . . . . .

1099-A . . . . . . . . . . . . . . . . . . . . . . . . . . .

1099-MISC for crop insurance . . . . . . . . . . . . . .

1099-G or CCC-1099-G

• For disaster payments . . . . . . . . . . . . . . . .

• For other agricultural program payments . . . . . .

Where to

report

Line 3a

Line 5b

Line 6a

Line 6a

Line 4a

You may receive Form 1099-MISC for other types of income.

In this case, report it on whichever line best describes the

income. For example, if you receive a Form 1099-MISC for

custom farming work, include this amount on line 7. In most

cases, your business income will be in the form of cash, checks,

and debit/credit card payments. Therefore, you should consider

the amounts shown on Form 1099-K, Payment Card and Third

Party Network Transactions, along with all other amounts

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Lines 3a and 3b

If you received distributions from a cooperative in 2025, you

should receive a Form 1099-PATR. On line 3a, show your total

distributions from cooperatives. This includes patronage

dividends, nonpatronage distributions, per-unit retain allocations,

and redemptions of nonqualified written notices of allocation and

per-unit retain certificates.

Show patronage dividends received in cash and the dollar

amount of qualified written notices of allocation. If you received

property as patronage dividends, report the FMV of the property

as income. Include cash advances received from a marketing

cooperative. If you received per-unit retains in cash, show the

amount of cash. If you received qualified per-unit retain

certificates, show the stated dollar amount of the certificates.

Don’t include as income on line 3b patronage dividends from

buying personal or family items, capital assets, or depreciable

assets. Enter these amounts on line 3a only. Because you don’t

report patronage dividends from these items as income, you

must subtract the amount of the dividend from the cost or other

basis of these items.

Lines 4a and 4b

Enter on line 4a the total of the government agricultural program

payments that you received. This includes the following

amounts.

• Price loss coverage payments.

• Agriculture risk coverage payments.

• Market Facilitation Program payments.

• Market gain from the repayment of a secured Commodity

Credit Corporation (CCC) loan for less than the original loan

amount.

• Diversion payments.

• Cost-share payments (sight drafts).

• Payments in the form of materials (such as fertilizer or lime) or

services (such as grading or building dams).

These amounts are usually reported to you on Form 1099-G.

You may also receive Form CCC-1099-G from the Department of

Agriculture showing the amounts and types of payments made to

you.

On line 4b, report only the taxable amount. For example, don’t

report the market gain shown on Form CCC-1099-G on line 4b if

you elected to report CCC loan proceeds as income in the year

received (see Lines 5a Through 5c) next. No gain results from

redemption of the commodity because you previously reported

the CCC loan proceeds as income. You are treated as

repurchasing the commodity for the amount of the loan

repayment. However, if you didn’t report the CCC loan proceeds

under the election, you must report the market gain on line 4b.

Lines 5a Through 5c

CCC loans. In most cases, you don’t report CCC loan proceeds

as income. However, if you pledge part or all of your production

to secure a CCC loan, you can elect to report the loan proceeds

as income in the year you receive them. If you make this election

(or made the election in a prior year), report loan proceeds you

received in 2025 on line 5a. Attach a statement to your return

showing the details of the loan(s). See chapter 3 of Pub. 225.

Forfeited CCC loans. Include the full amount forfeited on

line 5b, even if you reported the loan proceeds as income. This

amount may be reported to you on Form 1099-A.

If you didn’t elect to report the loan proceeds as income, also

include the forfeited amount on line 5c.

If you did elect to report the loan proceeds as income, you

generally won’t have an entry on line 5c. But if the amount

forfeited is different from your basis in the commodity, you may

have an entry on line 5c.

See chapter 3 of Pub. 225 for details on the tax

consequences of electing to report CCC loan proceeds as

income or forfeiting CCC loans.

Lines 6a Through 6d

In most cases, you must report crop insurance proceeds in the

year you receive them. Federal crop disaster payments are

treated as crop insurance proceeds. However, if 2025 was the

year of damage, you can elect to include certain proceeds in

income for 2026. To make this election, check the box on line 6c

and attach a statement to your return. See chapter 3 of Pub. 225

for a description of the proceeds for which an election can be

made and for what you must include in your statement.

If you elect to defer any eligible crop insurance proceeds, you

must defer all such crop insurance proceeds (including federal

crop disaster payments) from a single trade or business.

Enter on line 6a the total crop insurance proceeds you

received in 2025, even if you elect to include them in income for

2026.

Enter on line 6b the taxable amount of the proceeds you

received in 2025. Don’t include proceeds you elect to include in

income for 2026.

Enter on line 6d the amount, if any, of crop insurance

proceeds you received in 2024 and elected to include in income

for 2025.

Line 8

Enter on line 8 income not otherwise reportable on lines 1

through 7. This includes the following types of income.

• Illegal federal irrigation subsidies. See chapter 3 of Pub. 225.

• Bartering income.

• Income from cancellation of debt. In most cases, if a debt is

canceled or forgiven, you must include the canceled amount in

income. If a federal agency, financial institution, or credit union

canceled or forgave a debt you owed of $600 or more, it should

send you a Form 1099-C, or similar statement, by January 31,

2026, showing the amount of debt canceled in 2025. However,

you may be able to exclude the canceled debt from income. See

Pub. 4681 for details.

• State gasoline or fuel tax refunds you received in 2025.

• Any amount included in income from line 3 of Form 6478,

Biofuel Producer Credit.

• Any amount included in income from line 10 of Form 8864,

Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels

Credit.

• The amount of credit for federal tax paid on fuels claimed on

your 2024 Schedule 3 (Form 1040). For information on including

the credit in income, see chapter 2 of Pub. 510.

• Any recapture of excess depreciation on any listed property,

including any section 179 expense deduction, if the business

use percentage of that property decreased to 50% or less in

2025. Use Part IV of Form 4797 to figure the recapture. See the

instructions for Schedule C (Form 1040), line 13, for the

definition of “listed property.”

• The inclusion amount on leased listed property (other than

vehicles) when the business use percentage drops to 50% or

less. See chapter 5 of Pub. 946 to figure the amount.

• Any recapture of the deduction or credit for clean-fuel vehicle

refueling property or alternative fuel vehicle refueling property

used in your farming business. For details on how to figure

recapture, see section 30C(e)(5).

• Any income from breeding fees, or fees from renting teams,

machinery, or land that isn’t reported on Schedule E (Form 1040)

or Form 4835.

• The gain or loss on the sale of commodity futures contracts if

the contracts were made to protect you from price changes.

These are a form of business insurance and are considered

hedges. If you had a loss in a closed futures contract, enclose

the amount of the loss in parentheses.

For property acquired and hedging positions established,

you must clearly identify on your books and records both

CAUTION the hedging transaction and the item(s) or aggregate risk

being hedged.

!

Purchase or sales contracts aren’t true hedges if they offset

losses that already occurred. If you bought or sold commodity

futures with the hope of making a profit due to favorable price

changes, report the profit or loss on Form 6781 instead of this

line.

Part II. Farm Expenses

Don’t deduct the following.

• Personal or living expenses (such as taxes, insurance, or

repairs on your home) that don’t produce farm income.

• Expenses of raising anything you or your family used that

would not have otherwise been deductible as an expense except

for the presence of the income-producing farm activity.

• The value of animals you raised that died.

• Inventory losses.

• Personal losses.

If you were repaid for any part of an expense during the same

year, you must subtract the amount you were repaid from the

deduction.

Capitalizing costs of producing property and acquiring

property for resale. If you produced real or tangible personal

property or acquired property for resale, you must generally

capitalize certain expenses to your inventory or other property.

These expenses include the direct costs of the property and any

indirect costs properly allocable to that property.

For tax years beginning after 2017, small business taxpayers,

defined later, are not required to capitalize costs under section

263A. Section 263A generally doesn’t apply to the following

expenses.

1. Producing any plant that has a preproduction period of 2

years or less.

2. Raising animals.

3. Replanting certain crops if they were lost or damaged by

reason of freezing temperatures, disease, drought, pests, or

casualty.

Exceptions (1) and (2) don’t apply to tax shelters, farming

syndicates, partnerships, or corporations required to use the

accrual method of accounting under section 447 or 448(a)(3).

Special rules apply to exception (3) if replanting costs are

paid or incurred by a taxpayer other than the person described in

section 263A(d)(2)(A). See sections 263A(d)(2)(B) and (C) for

these different rules. Under section 263A(d)(2)(C), there is a

temporary rule for replanting costs of citrus plants that are paid

or incurred after December 22, 2017, and on or before

December 22, 2027.

Small business taxpayer. A small business taxpayer is one

that has gross receipts of $31 million or less for the 3 prior tax

years and is not a tax shelter, as defined in section 448(d)(3).

See also the inflation adjustment in Rev. Proc. 2024-40 (updated

annually), which increased the threshold for small business

taxpayers from $30 million to $31 million for tax years beginning

in 2025.

If you capitalize your expenses, don’t reduce your deductions

on lines 10 through 32e by the capitalized expenses. Instead,

enter the total amount capitalized in parentheses on line 32f (to

indicate a negative amount) and enter “263A” in the space to the

left of the total. See Preproductive period expenses, later, for

details.

But you may be able to currently deduct rather than capitalize

the expenses of producing a plant with a preproductive period of

more than 2 years.

5

Election to deduct certain preproductive period expenses.

If the preproductive period of any plant you produce is more than

2 years, you can elect to currently deduct the expenses rather

than capitalize them. But you can’t make this election for the

costs of planting or growing citrus or almond groves incurred

before the end of the fourth tax year beginning with the tax year

you planted them in their permanent grove. You are treated as

having made the election by deducting the preproductive period

expenses in the first tax year for which you can make this

election and by applying the special rules, discussed later.

In the case of a partnership or S corporation, the election

must be made by the partner, shareholder, or member.

CAUTION This election can’t be made by tax shelters, farming

syndicates, partnerships, or corporations required to use the

accrual method of accounting under section 447 or 448(a)(3).

!

Unless you obtain IRS consent, you must make this election

for the first tax year in which you engage in a farming business

involving the production of property subject to the capitalization

rules. You can’t revoke this election without IRS consent.

Special rules. If you make the election to deduct

preproductive expenses for plants:

• Any gain you realize when disposing of the plants is ordinary

income up to the amount of the preproductive expenses you

deducted, and

• The alternative depreciation rules apply to property placed in

service in any tax year your election is in effect.

For details, see Uniform Capitalization Rules in chapter 6 of

Pub. 225.

Prepaid farm supplies. In most cases, if you use the cash

method of accounting and your prepaid farm supplies are more

than 50% of your other deductible farm expenses, your

deduction for those supplies may be limited. Prepaid farm

supplies include expenses for feed, seed, fertilizer, and similar

farm supplies not used or consumed during the year.

They also include the cost of poultry that would be allowable

as a deduction in a later tax year if you were to:

1. Capitalize the cost of poultry bought for use in your

farming business and deduct it ratably over the lesser of 12

months or the useful life of the poultry, and

2. Deduct the cost of poultry bought for resale in the year

you sell or otherwise dispose of it.

If the limit applies, you can deduct prepaid farm supplies that

don’t exceed 50% of your other deductible farm expenses in the

year of payment. You can deduct the excess only in the year you

use or consume the supplies (other than poultry, which is

deductible, as explained above). For details and exceptions to

these rules, see chapter 4 of Pub. 225.

Whether or not this 50% limit applies, your expenses for

livestock feed paid during the year but consumed in a later year

may be subject to the rules explained in the line 16 instructions.

Line 10

You can deduct the actual expenses of operating your car or

truck or take the standard mileage rate. You must use actual

expenses if you used five or more vehicles simultaneously in

your farming business (such as in fleet operations). You can’t

use actual expenses for a leased vehicle if you previously used

the standard mileage rate for that vehicle.

You can take the standard mileage rate for 2025 only if you:

• Owned the vehicle and used the standard mileage rate for the

first year you placed the vehicle in service, or

• Leased the vehicle and are using the standard mileage rate

for the entire lease period.

If you take the standard mileage rate:

• Multiply the business standard mileage rate by 70 cents a

mile; and

6

• Add to this amount your parking fees and tolls, and enter the

total on line 10.

Don’t deduct depreciation, rent or lease payments, or your

actual operating expenses.

If you deduct actual expenses:

• Include on line 10 the business portion of expenses for

gasoline, oil, repairs, insurance, license plates, etc.; and

• Show depreciation on line 14 and rent or lease payments on

line 24a.

If you claim any car or truck expenses (actual or the standard

mileage rate), you must provide the information requested on

Form 4562, Part V. Be sure to attach Form 4562 to your return.

For details, see chapter 4 of Pub. 463.

If you use your vehicle for both business and personal

purposes and you claimed a deduction in 2025 on

CAUTION Schedule 1-A (Form 1040) for the vehicle loan interest

allocable to your personal use, then you can’t claim a deduction

for that same interest on Schedule F. See Schedule 1-A (Form

1040) and its instructions for more information.

!

Line 12

Deductible conservation expenses are generally those that are

paid to conserve soil and water for land used in farming, to

prevent erosion of land used for farming, or for endangered

species recovery. These expenses include (but aren’t limited to)

costs for the following.

• The treatment or movement of earth, such as leveling,

grading, conditioning, terracing, contour furrowing, and the

restoration of soil fertility.

• The construction, control, and protection of diversion

channels, drainage ditches, irrigation ditches, earthen dams,

watercourses, outlets, and ponds.

• The eradication of brush.

• The planting of windbreaks.

• The achievement of site-specific management actions

recommended in recovery plans approved pursuant to the

Endangered Species Act of 1973.

These expenses can be deducted only if they’re consistent

with a conservation plan approved by the Natural Resources

Conservation Service of the Department of Agriculture or a

recovery plan approved pursuant to the Endangered Species Act

of 1973 for the area in which your land is located. If no plan

exists, the expenses must be consistent with a plan of a

comparable state agency. You can’t deduct the expenses if they

were paid or incurred for land used in farming in a foreign

country.

Don’t deduct expenses you paid or incurred to drain or fill

wetlands, or to prepare land for center pivot irrigation systems.

Your deduction can’t exceed 25% of your gross income from

farming (excluding certain gains from selling assets such as farm

machinery and land). If your conservation expenses are more

than the limit, the excess can be carried forward and deducted in

later tax years. However, the amount deductible for any 1 year

can’t exceed the 25% gross income limit for that year.

For details, see chapter 5 of Pub. 225.

Line 13

Enter amounts paid for custom hire or machine work (the

machine operator furnished the equipment).

Don’t include amounts paid for rental or lease of equipment

you operated yourself. Instead, report those amounts on

line 24a.

Line 14

You can deduct depreciation of buildings, improvements, cars

and trucks, machinery, and other farm equipment of a permanent

nature.

Don’t deduct depreciation of your home, furniture or other

personal items, land, livestock you bought or raised for resale, or

other property in your inventory.

You can also elect under section 179 to expense a portion of

the cost of certain property you bought in 2025 for use in your

farming business. The section 179 election is made on Form

4562.

Special depreciation allowance. You can elect to claim a

100% special depreciation allowance for certain specified plants

bearing fruits and nuts planted or grafted after January 19, 2025.

In addition, you can elect to claim a 40% special depreciation

allowance for certain specified plants bearing fruits and nuts

planted or grafted after 2024 and before January 20, 2025. See

the Instructions for Form 4562 for more information.

Electing farming business. If you made an election not to

have the business interest expense limitation apply, any property

with a recovery period of 10 years or more held by you must be

depreciated under the alternative depreciation system. For

details, see Rev. Proc. 2019-08, available at IRS.gov/irb/

2019-03_IRB#RP-2019-08 (or its successor).

For information about depreciation and the section 179

deduction, see Pub. 946 and chapter 7 of Pub. 225. For details

on the special depreciation allowance, see chapter 3 of Pub.

946.

See the Instructions for Form 4562 for information on when

you must complete and attach Form 4562.

Line 15

Deduct contributions to employee benefit programs that aren’t

an incidental part of a pension or profit-sharing plan included on

line 23. Examples are accident and health plans, group-term life

insurance, and dependent care assistance programs. If you

made contributions on your behalf as a self-employed person to

a dependent care assistance program, complete Form 2441,

Parts I and III, to figure your deductible contributions to that

program.

Contributions you made on your behalf as a self-employed

person to an accident and health plan or for group-term life

insurance aren’t deductible on Schedule F (Form 1040).

However, you may be able to deduct on Schedule 1 (Form

1040), line 17, the amount you paid for health insurance on

behalf of yourself, your spouse, and your dependent(s) even if

you don’t itemize your deductions. See the instructions for

Schedule 1 (Form 1040), line 17, for details.

You must reduce your line 15 deduction by the amount of any

credit for small employer health insurance premiums determined

on Form 8941. See Form 8941 and its instructions to determine

which expenses are eligible for the credit.

Line 16

If you use the cash method, you can’t deduct when paid the cost

of feed your livestock will consume in a later year unless all of

the following apply.

• The payment was for the purchase of feed rather than a

deposit.

• The prepayment had a business purpose and wasn’t made

merely to avoid tax.

• Deducting the prepayment won’t materially distort your

income.

Line 18

Don’t include the cost of transportation incurred in purchasing

livestock held for resale as freight paid. Instead, add these costs

to the cost of the livestock.

Line 20

Deduct on this line premiums paid for farm business insurance.

Deduct on line 15 amounts paid for employee accident and

health insurance. Amounts credited to a reserve for

self-insurance or premiums paid for a policy that pays for your

lost earnings due to sickness or disability aren’t deductible. For

details, see chapter 4 of Pub. 225.

Lines 21a and 21b

Interest allocation rules. The tax treatment of interest

expense differs depending on its type. For example, home

mortgage interest and investment interest are treated differently.

Interest allocation rules require you to allocate (classify) your

interest expense so it’s deducted (or capitalized) on the correct

line of your return and receives the right tax treatment. These

rules could affect how much interest you are allowed to deduct

on Schedule F (Form 1040).

In most cases, you allocate interest expense by tracing how

the proceeds of the loan are used. See chapter 4 of Pub. 225 for

details.

If you paid interest on a debt secured by your main home and

any of the proceeds from that debt were used in your farming

business, see chapter 4 of Pub. 225 to figure the amount to

include on lines 21a and 21b.

How to report. Before entering an amount on line 21a or 21b,

see the Instructions for Form 8990 to identify whether you are

required to limit your business interest expense or whether you

can elect not to limit your business interest expense. If you are

required to limit your business interest expense, include only the

amount you are allowed to deduct on lines 21a and 21b. If you

are not required to limit your business interest expense and if

you have a mortgage on real property used in your farming

business (other than your main home), enter on line 21a the

interest you paid for 2025 to banks or other financial institutions

for which you received a Form 1098 (or similar statement). If you

didn’t receive a Form 1098, enter the interest on line 21b.

If you paid more mortgage interest than is shown on Form

1098 (or similar statement), see chapter 4 of Pub. 225 to find out

if you can deduct the additional interest. If you can, include the

amount on line 21a. Attach a statement to your return explaining

the difference and enter “See attached” in the margin next to

line 21a.

If you and at least one other person (other than your spouse if

you file a joint return) were liable for and paid interest on the

mortgage and the other person received the Form 1098 (or

similar statement), include your share of the interest on line 21b.

Attach a statement to your return showing the name and address

of the person who received the Form 1098 (or similar statement).

In the margin next to line 21b, enter “See attached.”

Don’t deduct interest you prepaid in 2025 for later years;

include only the part that applies to 2025.

If you use your vehicle for both business and personal

purposes and you claimed a deduction in 2025 on

CAUTION Schedule 1-A (Form 1040) for the vehicle loan interest

allocable to your personal use, then you can’t claim a deduction

for that same interest on Schedule F. See Schedule 1-A (Form

1040) and its instructions for more information.

!

If all of the above apply, you can deduct the prepaid feed

when paid, subject to the overall limit for prepaid farm supplies,

explained earlier. If all of the above don’t apply, you can deduct

the prepaid feed only in the year it’s consumed.

7

Line 22

figuring your income and expenses. For details, see chapter 8 of

Pub. 225.

Include the cost of boarding farm labor but not the value of

any products they used from the farm. Include only what you

paid household help to care for farm laborers.

You can deduct the following taxes on this line.

• Real estate and personal property taxes on farm business

assets.

• Social security and Medicare taxes you paid to match what

you are required to withhold from farm employees’ wages.

• Federal unemployment tax.

• Federal highway use tax.

• Contributions to a state unemployment insurance fund or

disability benefit fund if they’re considered taxes under state law.

Enter the amounts you paid for farm labor. Don’t include

amounts paid to yourself. Reduce your deduction by the

amounts claimed on the following.

• Form 5884, Work Opportunity Credit.

• Form 8844, Empowerment Zone Employment Credit.

• Form 8932, Credit for Employer Differential Wage Payments.

• Form 8994, Employer Credit for Paid Family and Medical

Leave.

If you provided taxable fringe benefits to your employees,

such as personal use of a car, don’t include in farm labor

CAUTION the amounts you depreciated or deducted elsewhere.

!

Line 23

Enter your deduction for contributions to employee pension,

profit-sharing, or annuity plans. If the plan included you as a

self-employed person, enter contributions made as an employer

on your behalf on Schedule 1 (Form 1040), line 16, not on

Schedule F (Form 1040).

In most cases, you must file the applicable form listed next if

you maintain a pension, profit-sharing, or other funded-deferred

compensation plan. The filing requirement isn’t affected by

whether the plan qualified under the Internal Revenue Code, or

whether you claim a deduction for the current tax year. There is a

penalty for failure to timely file these forms. See U.S. Department

of Labor.

Form 5500-EZ. File this form if you have a one-participant

retirement plan that meets certain requirements. A

one-participant plan is a plan that covers only you (or you and

your spouse).

Form 5500-SF. File this form electronically with the Department

of Labor (at efast.dol.gov) if you have a small plan (fewer than

100 participants in most cases) that meets certain requirements.

Form 5500. File this form electronically with the Department of

Labor (at efast.dol.gov) for a plan that doesn’t meet the

requirements for filing Form 5500-EZ or 5500-SF.

For details, see Pub. 560.

Lines 24a and 24b

If you rented or leased vehicles, machinery, or equipment, enter

on line 24a the business portion of your rental cost. But, if you

leased a vehicle for a term of 30 days or more, you may have to

reduce your deduction by an inclusion amount. See Leasing a

Car in chapter 4 of Pub. 463 to figure this amount.

Enter on line 24b amounts paid to rent or lease other property

such as pasture or farmland.

Line 25

Enter amounts you paid for repairs and maintenance of farm

buildings, machinery, and equipment that are not payments for

improvements to the property. Amounts are paid for

improvements if they are for betterments to your property or

restorations of your property (such as the replacements of major

components or substantial structural parts), or if they adapt your

property to a new or different use. See chapter 4 of Pub. 225 for

more information.

Don’t deduct repairs or maintenance on your home.

However, you may be able to elect to capitalize and

depreciate certain amounts paid for repair and maintenance of

tangible property to the extent you treat these amounts as capital

expenditures on your books and records regularly used in

8

Line 29

Don’t deduct the following taxes on this line.

• Federal income taxes, including your self-employment tax.

However, you can deduct one-half of self-employment tax on

Schedule 1 (Form 1040), line 15.

• Estate and gift taxes.

• Taxes assessed for improvements, such as paving and

sewers.

• Taxes on your home or personal-use property. You may be

able to deduct on line 32 expenses related to your home or

principle residence, such as property taxes, if you use your home

to conduct farming activities. See Business use of your home,

later.

• State and local sales taxes on property purchased for use in

your farming business. Instead, treat these taxes as part of the

cost of the property.

• Other taxes not related to your farming business.

Line 30

Enter amounts you paid for gas, electricity, water, and other

utilities for business use on the farm. Don’t include personal

utilities. You can’t deduct the base rate (including taxes) of the

first telephone line into your residence, even if you use it for your

farming business. But you can deduct expenses you paid for

your farming business that are more than the cost of the base

rate for the first phone line. For example, if you had a second

phone line, you can deduct the business percentage of the

charges for that line, including the base rate charges.

Lines 32a Through 32f

Include all ordinary and necessary farm expenses not deducted

elsewhere on Schedule F (Form 1040), such as advertising,

office supplies, etc. Don’t include fines or penalties paid to a

government for violating any law. For details on business

expenses, see chapter 4 of Pub. 225.

At-risk loss deduction. Any loss from this activity that wasn’t

allowed last year because of the at-risk rules is treated as a

deduction allocable to this activity in 2025. See Form 6198 and

its instructions for more details.

Bad debts. See chapter 8 of Pub. 334.

Business startup costs. If your farming business began in

2025, you can elect to deduct up to $5,000 of certain business

startup costs. The $5,000 limit is reduced (but not below zero) by

the amount by which your startup costs exceed $50,000. Your

remaining startup costs can be amortized over a 180-month

period, beginning with the month the farming business began.

For details, see chapters 4 and 7 of Pub. 225. For amortization

that begins in 2025, you must complete and attach Form 4562.

Business use of your home. You may be able to deduct

certain expenses for business use of your home, subject to

limitations. You may also be able to use a simplified method to

figure your deduction. Use the appropriate worksheets in Pub.

587 to figure your allowable deduction. Don’t use Form 8829.

De minimis safe harbor for tangible property. You may be

able to elect to use a de minimis safe harbor to deduct amounts

paid for certain tangible real or personal property used in your

farming business. If you elect the de minimis safe harbor for the

tax year, enter the total amounts you paid for property qualifying

under the de minimis safe harbor on line 32. Don’t include these

amounts on any other line. For details, see chapter 8 of Pub.

334.

Energy efficient commercial buildings deduction. You may

be able to deduct part or all of the expenses of modifying an

existing commercial building to make it energy efficient. For

details, see Form 7205 and its instructions.

Forestation and reforestation costs. Reforestation costs are

generally capital expenditures. However, for each qualified

timber property, you can elect to expense up to $10,000 ($5,000

if married filing separately) of qualifying reforestation costs paid

or incurred in 2025.

You can elect to amortize the remaining costs over 84

months. For amortization that begins in 2025, you must complete

and attach Form 4562.

The amortization election doesn’t apply to trusts, and the

expense election doesn’t apply to estates and trusts. For details

on reforestation expenses, see chapters 4 and 7 of Pub. 225.

Legal and professional fees. You can include on this line fees

charged by accountants and attorneys that are ordinary and

necessary expenses directly related to your farming business.

Include fees for tax advice and for the preparation of tax forms

related to your farming business. Also, include expenses

incurred in resolving asserted tax deficiencies related to your

farming business.

Tools. You can deduct the amount you paid for tools that have a

short life or cost a small amount, such as shovels and rakes.

Travel and meals. In most cases, you can deduct expenses for

farm business travel and 50% of your business meals. See the

instructions for Schedule C (Form 1040), lines 24a and 24b.

!

Entertainment expenses related to your trade or business

are generally no longer deductible after 2017.

CAUTION

Preproductive period expenses. If you had preproductive

period expenses in 2025 that you are capitalizing, enter the total

of these expenses in parentheses on line 32f (to indicate a

negative amount) and enter “263A” in the space to the left of the

total.

For details, see Capitalizing costs of producing property and

acquiring property for resale, earlier, and Uniform Capitalization

Rules in chapter 6 of Pub. 225.

Excess business loss limitation. Noncorporate taxpayers

may be subject to excess business loss limitations. The at-risk

limits and the passive activity limits are applied before

calculating the amount of any excess business loss. An excess

business loss is the amount by which the total deductions

attributable to all of your trades or businesses exceed your total

gross income and gains attributable to those trades or

businesses plus $313,000 (or $626,000 in the case of a joint

return). A trade or business includes, but is not limited to,

Schedule F (Form 1040) and Schedule C (Form 1040) activities,

an activity reported on Form 4835, and other business activities

reported on Schedule E (Form 1040).

Business gains and losses reported on Form 4797 and Form

8949 are included in the excess business loss calculation. This

includes farming losses from casualty losses or losses by reason

of disease or drought. Excess business losses that are

disallowed are treated as an NOL carryover to the following tax

year. See Form 461 and its instructions for details.

Line 33

If line 32f is a negative amount, subtract it from the total of lines

10 through 32e. Enter the result on line 33.

Line 34

Figuring your net profit or loss. If line 33 is more than line 9,

don’t enter your loss on line 34 until you have applied the at-risk

rules and the passive activity loss rules. To apply these rules,

follow the instructions for line 36 and the Instructions for Form

8582. After applying these rules, the amount on line 34 will be

your loss, and it may be smaller than the amount figured by

subtracting line 33 from line 9. You may also be required to file

Form 461, which limits the allowable loss. See Form 461 and its

instructions for more information.

If line 9 is more than line 33, and you don’t have prior-year

unallowed passive activity losses, subtract line 33 from line 9.

The result is your net profit.

If line 9 is more than line 33, and you have prior-year

unallowed passive activity losses, don’t enter your net profit on

line 34 until you have figured the amount of prior-year unallowed

passive activity losses you may claim this year for this activity.

Use Form 8582 to figure the amount of prior-year unallowed

passive activity losses you may include on line 34. Make sure to

indicate that you are including prior-year passive activity losses

by entering “PAL” to the left of the entry space.

If you checked the “No” box on line E, see the Instructions for

Form 8582; you may need to include information from this

schedule on that form, even if you have a net profit.

Partnerships. Subtract line 33 from line 9. If the amount is a

loss, the partners may need to apply the at-risk rules and the

passive activity loss rules to determine the amount of their loss

on line 34. A partner may also be required to file Form 461 to

limit any excess business loss. See Form 461 and its instructions

for more information.

Reporting your net profit or loss. Once you have figured your

net profit or loss, report it as follows. You must also consider any

excess business loss limitation. See Form 461 and its

instructions for more information.

Individuals. Enter your net profit or loss on line 34 and on

Schedule 1 (Form 1040), line 6 and; Schedule SE (Form 1040),

line 1a.

Nonresident aliens. Enter the net profit or loss on line 34

and on Schedule 1 (Form 1040), line 6. You should also enter

this amount on Schedule SE (Form 1040), line 1a, if you are

covered under the U.S. social security system due to an

international social security agreement currently in effect. See

the Instructions for Schedule SE (Form 1040) or SSA.gov/

international/agreements for information on international social

security agreements.

Partnerships. Enter the net profit or loss on line 34 and on

Form 1065, line 5. The excess business loss rules are applied at

the partner level.

Trusts and estates. Enter the net profit or loss on line 34 and

on Form 1041, line 6.

Community income. If you and your spouse had community

income and are filing separate returns, see the Instructions for

Schedule SE (Form 1040) before figuring self-employment tax.

Earned income credit. If you have a net profit on line 34, this

amount is earned income and may qualify you for the earned

income credit if you meet certain conditions. See the instructions

for Form 1040, line 27a, for details.

Conservation Reserve Program (CRP) payments. If you

received social security retirement or disability benefits in

addition to CRP payments, the CRP payments aren’t subject to

self-employment tax. You will deduct these payments from your

net farm profit or loss on Schedule SE (Form 1040), line 1b.

Don’t make any adjustment on Schedule F (Form 1040).

Line 35

Reserved for future use

9

Line 36

You don’t need to complete line 36 if line 9 is more than

TIP line 33.

At-risk rules. In most cases, if you have a loss from a farming

activity and amounts invested in the activity for which you aren’t

at risk, you must complete Form 6198 to figure your allowable

loss. The at-risk rules generally limit the amount of loss

(including loss on the disposition of assets) you can claim to the

amount you could actually lose in the activity.

Check box 36b if you have amounts invested in this activity for

which you aren’t at risk, such as the following.

• Nonrecourse loans used to finance the activity, to acquire

property used in the activity, or to acquire the activity that aren’t

secured by your own property (other than property used in the

activity). However, there is an exception for certain nonrecourse

financing borrowed by you in connection with holding real

property.

• Cash, property, or borrowed amounts used in the activity (or

contributed to the activity, or used to acquire the activity) that are

protected against loss by a guarantee, stop-loss agreement, or

other similar arrangement (excluding casualty insurance and

insurance against tort liability).

• Amounts borrowed for use in the activity from a person who

has an interest in the activity, other than as a creditor, or who is

related under section 465(b)(3)(C) to a person (other than you)

having such an interest.

Figuring your loss. Before determining your loss on line 34,

you must check box 36a or 36b to determine if your loss from

farming is limited by the at-risk rules. Follow the instructions

below that apply to your box 36 activity.

All investment is at risk. If all your investment amounts are

at risk in this activity, check box 36a. If you also checked the

“Yes” box on line E, your remaining loss is your loss. The at-risk

rules and the passive activity loss rules don’t apply. See Line 34,

earlier, for how to report your loss.

But, if you checked the “No” box on line E, you may need to

complete Form 8582 to figure your loss to enter on Line 34. See

the Instructions for Form 8582.

Some investment isn’t at risk. If some investment isn’t at

risk, check box 36b; the at-risk rules apply to your loss. Be sure

to attach Form 6198 to your return.

If you also checked the “Yes” box on line E, complete Form

6198 to determine the amount of your loss. The passive activity

loss rules don’t apply. See Line 34, earlier, for how to report your

loss.

10

But, if you checked the “No” box on line E, the passive activity

loss rules may apply. First, complete Form 6198 to figure the

amount of your profit or loss for the at-risk activity, which may

include amounts reported on other forms and schedules, and the

at-risk amount for the activity. Follow the Instructions for Form

6198 to determine how much of your Schedule F (Form 1040)

loss to enter on line 34. After you figure the amount of your loss

under the at-risk rules, you may need to complete Form 8582 to

figure the amount of loss to enter on line 34. See the Instructions

for Form 8582 for details.

If you checked box 36b because some investment isn’t at

risk and you don’t attach Form 6198, the processing of

CAUTION your return may be delayed.

!

At-risk loss deduction. Any loss from this activity not allowed

for 2025 only because of the at-risk rules is treated as a

deduction allocable to the activity in 2026.

More information. For details, see Pub. 925 and the

Instructions for Form 6198. Also, see Form 461 and its

instructions.

Note: Form 1040-SS filers, skip this line.

Part III. Farm Income—Accrual

Method

You may be required to use the accrual method of accounting. If

you use the accrual method, report farm income when it is due,

paid, earned, or taken into account as revenue in its applicable

financial statement, not when you receive it. In most cases, you

must include animals and crops in your inventory if you use this

method. See Pub. 225 for exceptions, inventory methods, how to

change methods of accounting, and rules that require certain

costs to be capitalized or included in inventory. For information

about accounting periods, see Pub. 538.

Chapter 11 bankruptcy. If you were a debtor in a chapter 11

bankruptcy case during 2025, see Chapter 11 Bankruptcy Cases

in the Instructions for Form 1040 (under Income) and the

Instructions for Schedule SE (Form 1040).

Lines 38a Through 40c

See the instructions for lines 3a through 5c, earlier.

Line 43

See Line 8, earlier.