All businesses will have “miscellaneous income” receipts. Farming and ranching are no different. These receipts generally comprise a small percentage of the business’ gross income. Even so, they must be accounted for by the business. On Schedule F, Line 8 is the “catch-all” for income that does not find a home on the previous seven lines. Some of the most common types of income reported on Line 8 include the following:
- Bartering income
- State gasoline or fuel tax refunds received in the current tax year
- Federal fuel tax credit calculated and claimed on the prior year’s income tax return, which is reported on Schedule 3, IRS Form 1040
- Income derived from breeding fees, fees from renting draft teams or farm machinery
The instructions for Schedule F have a more complete list these types of income streams which are best reported on Line 8 of Schedule F.
Example 1. Bill farms part-time raising row crops and vegetables. Bill uses two gasoline powered tractors which he inherited from his grandfather. Bill keeps records on how many gallons of gasoline he uses over the course of his farming activity; he purchases gasoline from pumps in town and pays the federal excise tax of $0.184 per gallon. During 2021 Bill bought 500 gallons of gasoline which he burned through his two tractors. Thus, the federal excise tax credit he claimed on his 2021 income tax return, filed in March of 2022, is $92 [$0.184 x 500]. Bill also deducted the cost of the fuel as an expense. Because he received a tax credit for a deductible expense, Bill will report the $92 as “other income” on his 2021 Schedule F, Line 8 as illustrated below.
Example 2. Susie operates an equine training and boarding facility (a farming business under I.R.C. § 2032A). As part of her business, she uses her stallions to service and breed mares of other owners and receives a stud fee of $1,000 per confirmed pregnancy. This year, Susie generated $20,000 in stud fees. She reports this income on Line 8 of her Schedule F as illustrated below.
If the producer has multiple sources of miscellaneous income, the income is combined to derive the total “other income” amount to report on Line 8, Schedule F. This total is subject to federal and state (if applicable) income tax and self-employment tax when the net profit (or loss) is calculated for the farm/ranch business.
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.