Farmers use Line 10 of Schedule F to report the business expenses of cars and light-duty trucks (pickups).
Farmers, like other business owners, have the option to either (1) deduct the actual cost of operating a truck or car in their business or (2) deduct the standard mileage rate for each mile of business use.
Actual Cost
Those taxpayers who choose the actual cost method may deduct those expenses related to the business use of the vehicle. These include gasoline, oil, repairs, license tags, insurance, and depreciation (subject to certain limits). Farmers choosing this method must keep good records of these expenses. (See Depreciation section below for rules for depreciating various vehicles used in the farm business).
Personal and Business Use
When vehicles are used for both personal and business purposes, taxpayers may take deductions only for the percentage of use attributable to the business. This requires detailed recordkeeping. Farmers, however, have a special rule under which they can claim 75% of the use of a car or light truck as business use without allocation records. Treas. Reg. § 1.274-6T(b). The rule applies if the taxpayer used the vehicle during most of the normal business day directly in connection with the business of farming. A farmer chooses this method of substantiating business use the first year the vehicle is placed in service. Once that choice is made, it cannot be changed.
Note: A farmer who uses his vehicle more than 75% for business purposes should keep records of business use vs. personal use. He may then deduct the actual percentage of expenses applicable to the business use.
Example 1. Jeremy uses his ¾-ton pickup for both personal and business use. Jeremy kept a mileage log over the course of the year. It documents that 85 percent of the miles he drove were business miles. Thus, 85 percent of all actual expenses related to the use of this pickup are deductible on Schedule F, Line 10.
Jeremy reports the allowed business costs for fuel, repairs, and miscellaneous expenses of $7,948 on Line 10. He reports $9,792 as his depreciation expense on Line 14. Jeremy attaches IRS Form 4562, Depreciation and Amortization, to his income tax return which reflects the adjustment made for personal pickup use.
Standard Mileage Rate
The standard mileage rate for 2022 is 58.5 cents per mile (56 cents in 2021). Taxpayers that operate five or more cars or light trucks at the same time are not eligible to use the standard mileage rate. Nor can the standard mileage rate be used if the owner has taken an IRC § 179 or other depreciation deduction for the vehicle.
Example 2. Jessica purchased a new crew-cab pickup to use in her business as well as for personal use. Jessica chooses to use the SMR on this vehicle, which is the third vehicle she owns. Keeping a mileage log Jessica can document that she drove this pickup 22,500 miles and paid $150 in tolls for business purposes during 2021. Jessica, therefore, reports $12,750 as her auto expense on Line 10. [(22,500 x $0.56) + $150]
In this case, Jessica does not have any depreciation assigned to the pickup because the SMR has a depreciation value built into the annual value.
The Center for Agricultural Law and Taxation is a partner of the National Agricultural Law Center (NALC) at the University of Arkansas System Division of Agriculture, which serves as the nation’s leading source of agricultural and food law research and information. This material is provided as part of that partnership and is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.