Qualifying as a Farm for Taxes

To qualify as a farmer for tax purposes, the Internal Revenue Service (IRS) defines a farmer as an individual who is "engaged in farming" and has a profit motive when operating a farming business.

Specifically, the IRS states that "You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or tenant".

To determine if you qualify as a farmer, the IRS uses factors, commonly known as the hobby loss rules, to assess the profit motive of your farming business.

Additionally, to be considered a farmer for tax purposes, you must make at least two-thirds of your income directly from farm activities.  Farming activities include raising or growing a product and selling it without further processing or modification.

It's important to note that someone may have a farm and produce farm income but may not qualify as a farmer under a specific tax provision.

Therefore, it's advisable to seek the advice of a tax professional to understand the IRS tax definitions of farm, farming, and farmer in the context of your individual circumstances.

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