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What is a Farm Income?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 31 May 2019
  • Copyright Protected:
    2003-2019
    Conjecture Corporation
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Farm income is money earned from farming. Governments tax farmers just like other businesses, but taxes for farmers are usually handled specially, as there can be some unique circumstances for farmers when it comes to filing taxes. For farmers in the United States, a tax form known as the Schedule F is used by sole proprietors to report farm income, while farms run as corporations and other types of business entities must file regular business tax forms.

Farmers can derive income from a number of sources, including selling produce and livestock, leasing fields to other farmers, and renting out their livestock or equipment. As with other types of businesses, losses can also be involved in farming, and there is a space on tax forms for reporting losses like damages from inclement weather. In addition, barter is a recognized form of farm income, and farmers are required to report proceeds of barter just like they do other kinds of income.

Handling taxes for a farm and receiving all available tax benefits can be a challenge. Some farmers use accounting services to handle their books, either relying on a bookkeeper year round to handle the accounts or bringing their financial information to an accountant once a year at tax time. Others may use tax software, including programs specifically designed to help people with farm income to report on their taxes.

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Farmers can also have non-farm income in a given year, not an uncommon situation for sole proprietors as they may have difficulty supporting their farms in some years. Some farmers may engage in other financial activities to make money, ranging from building custom furniture to providing instruction in an agricultural program at a college or university. All of this income must also be reported for taxation, although the taxes may be relatively low if the farmer has taken a loss on the farm in that year.

A number of government agencies track trends in farm income. This information is used to collect and distribute data about the farming market, trends in agriculture, and the financial situation for small farms. Many governments are interested in maintaining a healthy and stable agriculture industry, as they rely on farming to produce food for the citizens, as well as income through exports of farm products. Tracking trends in farming allows governments to determine if interventions need to be provided to keep farming communities strong and functional.

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