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taxmap/pubs/p225-000.htm#en_us_publink1000217598
Publication 225

Farmer's 
Tax Guide

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Acknowledgment:. The valuable advice and assistance given us each year by the National Farm Income Tax Extension Committee is gratefully acknowledged. 

taxmap/pubs/p225-000.htm#en_us_publink1000289413Introduction

You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. It also includes plantations, ranches, ranges, and orchards and groves.
This publication explains how the federal tax laws apply to farming. Use this publication as a guide to figure your taxes and complete your farm tax return. If you need more information on a subject, get the specific IRS tax publication covering that subject. We refer to many of these free publications throughout this publication. See chapter 16 for information on ordering these publications.
The explanations and examples in this publication reflect the Internal Revenue Service's interpretation of tax laws enacted by Congress, Treasury regulations, and court decisions. However, the information given does not cover every situation and is not intended to replace the law or change its meaning. This publication covers subjects on which a court may have rendered a decision more favorable to taxpayers than the interpretation of the Service. Until these differing interpretations are resolved by higher court decisions, or in some other way, this publication will continue to present the interpretation of the Service.
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The IRS Mission.(p2)

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Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.
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Comments and suggestions.(p2)

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We welcome your comments about this publication and your suggestions for future editions.
You can send us comments from IRS.gov/FormsPubs. Or you can write to:

Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224


Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
taxmap/pubs/p225-000.htm#en_us_publink100017542
Ordering forms and publications.(p2)
Visit IRS.gov/FormsPubs to download forms and publications. Otherwise, you can go to IRS.gov/FormsPubs to order current and prior-year forms and instructions. Your order should arrive within 10 business days.
taxmap/pubs/p225-000.htm#en_us_publink100017543
Tax questions.(p2)
If you have a tax question not answered by this publication, check IRS.gov and How To Get Tax Help at the end of this publication.
taxmap/pubs/p225-000.htm#en_us_publink1000217603

Comments on IRS enforcement actions.(p2)

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The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were established to receive comments from small business about federal agency enforcement actions. The Ombudsman will annually evaluate the enforcement activities of each agency and rate its responsiveness to small business. If you wish to comment on the enforcement actions of the IRS, you can:
taxmap/pubs/p225-000.htm#en_us_publink1000217604

Treasury Inspector General for Tax Administration (TIGTA).(p2)

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If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (1-800-877-8339 for TTY/TDD users). You can remain anonymous.
taxmap/pubs/p225-000.htm#en_us_publink1000217605

Farm tax classes.(p2)

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Many state Cooperative Extension Services conduct farm tax workshops in conjunction with the IRS. Contact your county or regional extension office for more information.
taxmap/pubs/p225-000.htm#en_us_publink1000263393

Rural Tax Education website.(p2)

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The Rural Tax Education website is a source for information concerning agriculturally related income and deductions and self-employment tax. The website is available for farmers and ranchers, other agricultural producers, Extension educators, and any one interested in learning about the tax side of the agricultural community. Members of the National Farm Income Tax Extension Committee are contributors for the website and the website is hosted by Utah State University Cooperative Extension. You can visit the website at www.ruraltax.org.

Future Developments(p2)

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The IRS has created a page on IRS.gov for information about Pub. 225, at
IRS.gov/Pub225. Information about recent developments affecting Pub. 225 will be posted on that page.

What's New for 2017(p2)

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The following items highlight a number of administrative and tax law changes for 2017. They are discussed in more detail throughout the publication.
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Disaster relief for Hurricanes Harvey, Irma, and Maria.(p2)
Disaster tax relief was enacted for those impacted by Hurricane Harvey, Irma, or Maria, including provisions that modified (the limit on the deduction for charitable contributions/the treatment of withdrawal of retirement funds/disaster-related employment relief/the calculation of casualty and theft losses). See Pub. 976, Disaster Relief, for more information.
taxmap/pubs/p225-000.htm#en_us_publink1000289441
Standard mileage rate.(p2)
For 2017, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 53.5 cents. See chapter 4.
taxmap/pubs/p225-000.htm#en_us_publink1000289442
Increased section 179 expense deduction dollar limits.(p2)
The maximum amount you can elect to deduct for most section 179 property you placed in service in 2017 is $510,000. This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2,030,000. See chapter 7.
taxmap/pubs/p225-000.htm#en_us_publink100068204
Disaster losses.(p2)
A new Section D has been added to Form 4684 to make an election (or revoke a prior election) to deduct a loss attributable to a federally declared disaster in the tax year immediately before the disaster year. See Pub. 547 for more information about disaster losses. See chapter 11.
taxmap/pubs/p225-000.htm#en_us_publink1000289446
Maximum net earnings.(p2)
The maximum net self-employment earnings subject to the social security part (12.4%) of the self-employment tax is $127,200 for 2017, up from $118,500 in both 2016 and 2015. There is no maximum limit on earnings subject to the Medicare part (2.9%) or, if applicable, the Additional Medicare Tax (0.9%). See chapter 12.
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Social security and Medicare tax for 2017.(p2)
The social security tax rate is 6.2% each for the employee and employer, unchanged from 2016. The social security wage base limit is $127,200.
The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2016. There is no wage base limit for Medicare tax. See chapter 13.
taxmap/pubs/p225-000.htm#en_us_publink100048130
New certification program for professional employer organizations.(p2)
The Tax Increase Prevention Act of 2014 required the IRS to establish a voluntary certification program for professional employer organizations (PEOs). PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. To become and remain certified under the certification program, certified professional employer organizations (CPEOs) must meet various requirements described in sections 3511 and 7705 and related published guidance. Certification as a CPEO may affect the employment tax liabilities of both the CPEO and its customers. A CPEO is generally treated as the employer of any individual who performs services for a customer of the CPEO and is covered by a contract described in section 7705(e) (2) between the CPEO and the customer (CPEO contract), but only for wages and other compensation paid to the individual by the CPEO. For more information, go to IRS.gov/CPEO. Also see Rev. Proc. 2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/ 2017-03_IRB/ar14.html. See chapter 13.
taxmap/pubs/p225-000.htm#en_us_publink100068206
Qualified small business payroll tax credit for increasing research activities.(p2)
For tax years beginning after December 31, 2015, a qualified small business may elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit against the employer's share of social security tax. The portion of the credit used against the employer's share of social security tax is allowed in the first calendar quarter beginning after the date that the qualified small business filed its income tax return. The first Form 943 that you can claim this credit on is Form 943 filed for calendar year 2017. For more information, see the Instructions for Form 943. See chapter 13.

What's New for 2018(p2)

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taxmap/pubs/p225-000.htm#en_us_publink100068208
Phase down of the special depreciation allowance.(p2)
The special depreciation allowance will be phased down to 40% for certain property placed in service after December 31, 2017, and certain plants bearing fruits and nuts or grafted after December 31, 2017. See chapter 7.
taxmap/pubs/p225-000.htm#en_us_publink1000289449
Maximum net earnings.(p2)
The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2018 will be discussed in the 2017 Pub. 334. See chapter 12.
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Social security and Medicare tax for 2018.(p2)
The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2018 will be discussed in Pub. 51 (For use in 2018).
The Medicare tax rate for 2018 will also be discussed in Pub. 51 (For use in 2018). There is no limit on the amount of wages subject to Medicare tax. See chapter 13.

Reminders(p3)

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The following reminders and other items may help you file your tax return.
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IRS e-file (Electronic Filing)

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You can file your tax returns electronically using an IRS e-file option. The benefits of IRS e-file include faster refunds, increased accuracy, and acknowledgment of IRS receipt of your return. You can use one of the following IRS e-file options.
  • Use an authorized IRS e-file provider.
  • Use a personal computer.
  • Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site.
For details on these fast filing methods, see your income tax package.
taxmap/pubs/p225-000.htm#en_us_publink1000217623
Principal agricultural activity codes.(p3)
You must enter on line B of Schedule F (Form 1040) a code that identifies your principal agricultural activity. It is important to use the correct code because this information will identify market segments of the public for IRS Taxpayer Education programs. The U.S. Census Bureau also uses this information for its economic census. See the list of Principal Agricultural Activity Codes on page 2 of Schedule F (Form 1040).
taxmap/pubs/p225-000.htm#en_us_publink1000217624
Publication on employer identification numbers (EINs).(p3)
Pub. 1635, Understanding Your Employer Identification Number, provides general information on EINs. Topics include how to apply for an EIN and how to complete Form SS-4.
taxmap/pubs/p225-000.htm#en_us_publink1000217625
Change of address.(p3)
If you change your home address, you should use Form 8822, Change of Address, to notify the IRS. If you change your business address, you should use Form 8822-B, Change of Address or Responsible Party — Business, to notify the IRS. Be sure to include your suite, room, or other unit number.
taxmap/pubs/p225-000.htm#en_us_publink1000217626
Reportable transactions.(p3)
You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. You may have to pay a penalty if you are required to file Form 8886 but do not do so. Reportable transactions include (1) transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, (2) transactions offered to you under conditions of confidentiality and for which you paid an advisor a minimum fee, (3) transactions for which you have or a related party has a right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained, (4) transactions that result in losses of at least $2 million in any single year or $4 million in any combination of years, and (5) transactions with asset holding periods of 45 days or less and that result in a tax credit of more than $250,000. For more information, see the Instructions for Form 8886.
taxmap/pubs/p225-000.htm#en_us_publink1000289429
Form W-4 for 2017.(p3)
You should make new Forms W-4 available to your employees and encourage them to check their income tax withholding for 2017. Those employees who owed a large amount of tax or received a large refund for 2016 may need to submit a new Form W-4.
taxmap/pubs/p225-000.htm#en_us_publink1000217628
Form 1099-MISC.(p3)
Generally, file Form 1099-MISC if you pay at least $600 in rents, services, and other miscellaneous payments in your farming business to an individual (for example, an accountant, an attorney, or a veterinarian) who is not your employee. Payments made to corporations for medical and health care payments, including payments made to veterinarians, generally must be reported on Form 1099.
taxmap/pubs/p225-000.htm#en_us_publink1000312822
Limited liability company (LLC).(p3)
For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301.7701-3. See Pub. 3402 for more details.
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Photographs of missing children.(p3)
The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) (24 hours a day, 7 days a week) if you recognize a child.