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Farm Income Expenses

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Farm Income Expenses




Do not deduct the following.

  • Personal or living expenses (such as taxes, insurance, or repairs on your home) that do not produce farm income.
  • Expenses of raising anything you or your family used.
  • The value of animals you raised that died.
  • Inventory losses.
  • Personal losses.

If you were repaid for any part of an expense, you must sub-tract the amount you were repaid from the deduction.

Capitalizing costs of property. If you produced real or tangi-ble personal property or acquired property for resale, certain expenses must be included in inventory costs or capitalized. These expenses include the direct costs of the property and the share of any indirect costs allocable to that property. However, these rules generally do not apply to expenses of:

  1. Producing any plant that has a preproductive period of 2 years or less,
  2. Raising animals, or
  3. Replanting certain crops if they were lost or damaged by reason of freezing temperatures, disease, drought, pests, or casualty.


Exceptions (1) and (2) do not apply to tax shelters, farming syndicates, partnerships, or corporations re-quired to use the accrual method of accounting under section 447 or 448(a)(3).

If you capitalize your expenses, do not reduce your deduc-tions on lines 10 through 32e by the capitalized expenses. In-stead, 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 ex-penses, later, for details.

But you may be able to currently deduct rather than capital-ize the expenses of producing a plant with a preproductive peri-od of more than 2 years. See Election to deduct certain prepro-ductive period expenses, next.

Please see instructions for Schedule F for more information.

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Views: 1110 Created on: Jun 15, 2013
Date updated: Sep 18, 2015

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