IRS Form 4835 – In the world of agricultural taxation, properly reporting rental income from farmland is essential for compliance and avoiding penalties. IRS Form 4835, also known as Farm Rental Income and Expenses, plays a crucial role for landowners who lease their property for farming purposes. This form helps report income derived from crop shares or livestock production without triggering self-employment taxes in certain cases. Whether you’re a landowner in rural America or managing inherited farmland, understanding Form 4835 can simplify your tax filing process. In this SEO-optimized guide, we’ll break down what the form is, who needs it, how to complete it, and key tips for accuracy—drawing from official IRS resources for the most up-to-date information as of 2026.
What is IRS Form 4835?
IRS Form 4835 is a specialized tax document used to report farm rental income and related expenses when the income is based on the production of crops or livestock by a tenant. Unlike standard rental income, this form applies specifically to situations where the landowner does not actively participate in the farm’s day-to-day operations. The primary purpose is to calculate net farm rental income or loss, which is then transferred to your individual tax return.
This form ensures that passive farm rental activities are treated correctly under tax law, avoiding self-employment tax while adhering to passive activity loss rules. It’s a one-page form divided into two main parts: Part I for gross income and Part II for expenses. Importantly, if you’re a tenant farmer or materially participate in farming, you should use Schedule F (Form 1040) instead.
For the latest version of the form, you can download it directly from the IRS website: IRS Form 4835 PDF.
Who Needs to File Form 4835?
Not every landowner or farmer needs to file Form 4835. It’s specifically for individuals who meet these criteria:
- You are the landowner or sub-lessor of farmland.
- Your rental income is based on shares of crops or livestock produced by the tenant (not fixed cash rent).
- You did not materially participate in the operation or management of the farm, as defined by IRS guidelines (e.g., no significant involvement in decisions like planting or harvesting).
- The activity qualifies as a rental under passive activity rules.
If you receive cash rent unrelated to production, report it on Schedule E, Part I. Tenants report their farming income on Schedule F. Estates, trusts, partnerships, or S corporations use different forms like Schedule E or Form 8825.
For qualified joint ventures (e.g., spouses filing jointly), each spouse can file a separate Form 4835 if they didn’t materially participate. Always consult IRS Publication 225 (Farmer’s Tax Guide) for detailed eligibility.
How to Fill Out IRS Form 4835: Step-by-Step?
Filling out Form 4835 requires gathering records of your income and expenses. Use either the cash or accrual accounting method, but be consistent. Here’s a breakdown of the form’s structure.
Top Section: Basic Information
- Enter your name, Social Security Number (SSN), and Employer Identification Number (EIN) if applicable (e.g., for retirement plans).
- Line A: Indicate if you actively participated in the farm rental activity (Yes/No). Active participation involves making management decisions, but it’s distinct from material participation.
Part I: Gross Farm Rental Income—Based on Production
This section calculates your total income from the rental activity. Report amounts when converted to cash or equivalent value.
- Line 1: Income from livestock, produce, grains, and other crops.
- Line 2a/2b: Cooperative distributions (from Form 1099-PATR) and their taxable amount.
- Line 3a/3b: Agricultural program payments and taxable portion.
- Line 4a/4b/4c: Commodity Credit Corporation (CCC) loans, including forfeited amounts.
- Line 5a/5b/5c/5d: Crop insurance proceeds and federal disaster payments; include deferred amounts from prior years if applicable. Check the box if electing to defer to the next year (attach a statement).
- Line 6: Other income, such as fuel tax credits or refunds.
- Line 7: Total gross farm rental income (sum of Lines 1–6). Transfer this to Schedule E (Form 1040), Line 42.
Part II: Expenses—Farm Rental Property
Deduct only business-related expenses; exclude personal costs. Do not include capitalized expenses in deductions—note them separately on Line 30 with “263A.”
Here’s a table summarizing common expense lines:
| Line | Expense Category | Key Notes |
|---|---|---|
| 8 | Car and truck expenses | Attach Form 4562 if needed; see Schedule F instructions. |
| 9 | Chemicals | Direct costs for farm use. |
| 10 | Conservation expenses | Limited to 25% of gross farming income; must follow approved plans. |
| 11 | Custom hire (machine work) | Payments for hired machinery. |
| 12 | Depreciation and section 179 | Use Form 4562; see Pub. 225. |
| 13 | Employee benefit programs | Excludes Line 21. |
| 14 | Feed | For livestock. |
| 15 | Fertilizers and lime | Soil enhancement costs. |
| 16 | Freight and trucking | Transportation expenses. |
| 17 | Gasoline, fuel, and oil | Vehicle and equipment fuel. |
| 18 | Insurance (other than health) | Property and liability coverage. |
| 19a/19b | Interest (mortgage/other) | May be limited; see Form 8990. |
| 20 | Labor hired | Less any employment credits. |
| 21 | Pension and profit-sharing plans | Retirement contributions. |
| 22a/22b | Rent or lease (vehicles/other) | Business portion only; adjust for long-term leases. |
| 23 | Repairs and maintenance | Upkeep of property and equipment. |
| 24 | Seeds and plants | Planting materials. |
| 25 | Storage and warehousing | Facility costs. |
| 26 | Supplies | General farm supplies. |
| 27 | Taxes | Property and other taxes. |
| 28 | Utilities | Electricity, water, etc. |
| 29 | Veterinary, breeding, and medicine | Animal health costs. |
| 30a–30g | Other expenses | Specify; include amortized or capitalized items. |
- Line 31: Total expenses (sum Lines 8–30g, adjusted for capitalized costs).
- Line 32: Net farm rental income or (loss) (Line 7 minus Line 31). If income, transfer to Schedule E, Line 40. If loss, proceed to Line 34.
- Line 33: Reserved.
- Line 34: For losses, check if all investment is at risk (34a) or some not (34b). Use Form 8582 for passive loss limitations and Form 6198 if not fully at risk.
Reporting Form 4835 on Your Tax Return
Attach Form 4835 to your Form 1040, 1040-SR, or 1040-NR. Gross income from Line 7 goes to Schedule E, Line 42. Net income or allowable loss from Line 32 (after limitations) goes to Schedule E, Line 40, and ultimately flows to Form 1040, Schedule 1. If you have a net income, consider using Schedule J to potentially reduce your tax liability.
For losses, passive activity rules may limit deductions. If you’re a real estate professional or meet other exceptions, you might deduct more—refer to Form 8582 instructions.
Common Mistakes to Avoid When Filing Form 4835
- Confusing with Schedule F: Don’t use Form 4835 if you materially participate; that’s for active farmers.
- Including Personal Expenses: Only deduct farm-related costs.
- Forgetting Deferrals: Properly handle crop insurance deferrals with attachments.
- Missing Citations: Always keep records and cite sources like Form 1099-PATR.
- Ignoring Limits: Conservation expenses can’t exceed 25% of gross income; interest may be capped.
Consult a tax professional for complex situations, especially with at-risk rules or passive losses.
Conclusion: Streamline Your Farm Rental Tax Reporting
Mastering IRS Form 4835 ensures accurate reporting of farm rental income and expenses, helping you stay compliant while optimizing your tax position. By using this form correctly, landowners can avoid self-employment taxes on passive income and deduct legitimate expenses. For the most current guidance, always refer to official IRS publications and the form itself. If you’re preparing your 2025 taxes, download the PDF and start gathering your records today. Remember, timely filing prevents penalties—file by the April 15, 2026, deadline or request an extension.