How to Deduct Expenses Related to Farm Land Held for Cash Rental

Rented farmland generates tax write-offs.

The Internal Revenue Service allows you to write off the expenses that you incur in owning rental real estate. It also allows you to write off the expenses that you incur in farming. In either case, just about every reasonable recurring expense can be taken against the income that you receive from your investment, but you need to be clear on whether your land is your farm or your investment that someone else uses as a farm.

Instructions

1. Determine what your relationship to your property is. For your property to truly be a cash rental that is considered to be real estate by the IRS, you need to be receiving regular rent payments not tied to the actual performance of the farm, and you must not be involved in farming the land. If you are either receiving crop share payments or doing the actual farming, the land is not considered to be real estate rented for cash and will need to be reported differently.

2. Collect all of your expenses for the tax year. Expenses that you can claim include any costs for travel to the land, insurance, legal fees, management fees, mortgage interest, taxes, utilities and any supplies. You can also claim other reasonable non-capital expenses.

3. Obtain a copy of Schedule E to Form 1040. You will use this form to report both your income and expenses from your rental real estate.

4. File your 1040 tax return with Schedule E attached. You will enter the net income, after deductions for all expenses, from your farmland in line 17 of your Form 1040.

References

• Internal Revenue Service: 2009 Schedule E (Form 1040)
• IRS: 2009 Instructions for Schedule E (Form 1040)
• IRS: 2009 Form 1040
• IRS: 2009 Instructions for Schedule F
• IRS: 2009 Form 4835