Farming and taxes: what you need to know in 2024

Preparing taxes for farmers involves its own set of challenges because they face tax rules that are different from most other businesses. You need to consider an array of unique tax issues related to farming, such as: government payment programs, farm property depreciation, crop insurance, prepaid farm expenses, commodity wages and farm income averaging.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Are crop insurance proceeds taxable income?

A: Yes, crop insurance proceeds received by a farmer due to physical crop damage or reduction of crop revenue are considered taxable income.

Q: Are barns classified as 20-year property?

A: Yes, barns are farm buildings and have a 20-year recovery period.

Q: If farm workers are paid with crops, does the farmer need to recognize the value of the crops as income before taking a deduction?

A: Yes, the farmer must report the value of the crop as income on Schedule F (Form 1040), Profit or Loss From Farming, Line 2, as if the crop had been sold. The farmer can then deduct the crop’s value as a labor expense on Line 22.

Q: If farmers do not want to show income, can they still treat CCC loans as loan proceeds?

A: Yes, farmers are not required to treat CCC loan proceeds as income. By default, CCC loans are considered loan proceeds unless the farmer elects to treat them as income.

To learn more about preparing taxes for farmers, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.