Rents: Farm Business Taxes (2025 IRS Guide)
This guide covers “Rents” within farm business taxes. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.
Adapted from Publication 225 (2025), Farmer's Tax Guide, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.
Rents
The cash rent you receive for the use of your farmland by another person or entity is generally rental income, reported on Schedule E, and not farm income. However, the rent is farm income if:
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Your arrangement with your tenant provides that you will materially participate in the production or management of production of the farm products on the land, and
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You materially participate.
Pasture income and rental.
If you pasture someone else’s livestock and take care of them for a fee, the income is from your farming business. You must enter it as “Other Income” on Schedule F. If you simply rent your pasture or other farm real estate for a flat cash amount without providing services, report the income as rent on Schedule E (Form 1040), Part I.
Crop Shares
You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. It doesn’t matter whether you use the cash method of accounting or an accrual method of accounting.
If you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income if:
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Your arrangement with your tenant provides that you will materially participate in the production or management of production of the farm products on the land, and
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You materially participate.
The crop share income isn’t included in self-employment income if:
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Your arrangement with your tenant doesn’t provide that you will materially participate in the production or management of production of the farm products on the land, or
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You don’t materially participate in operating the farm.
Crop shares you use to feed livestock.
Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. You must include the fair market value of the crop shares in income at that time. You’re entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Although these two transactions cancel each other for figuring adjusted gross income on Form 1040 or 1040-SR, they may be necessary to figure your self-employment tax. See Landlord Participation in Farming and Farm Optional Method in chapter 12.
Crop shares you give to others (gift).
Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. This applies even if the gift is made to a qualified charitable organization.
Example.
A tenant farmed part of your land under a crop-share arrangement. The tenant harvested and delivered the crop in your name to an elevator company. Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. They sell their crop shares in the following year and the elevator company makes payments directly to your children.
In this situation, you’re considered to have received rental income and then made a gift of that income. You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children.
Crop share loss.
If you’re involved in a rental or crop-share lease arrangement that isn’t included in self-employment income, any loss from these activities may be subject to the limits under the passive loss rules.
Machinery or Equipment
Income from renting machinery or equipment to others is subject to self-employment tax if the equipment is not leased with real property and the rental activity is a trade or business. Table 3-3. Income from Renting Machinery or Equipment summarizes the different tax treatments:
Table 3-3. Income from Renting Machinery or Equipment
| Report on | Subject to self-employment tax | |
|---|---|---|
| Machinery rented with land | Schedule E | No |
| Machinery rented without land, rising to the level of a trade or business | Schedule C | Yes |
| Machinery rented without land, not rising to the level of a trade or business | Schedule 1, Line 8l | No |
| Machinery rented with land in a crop-share arrangement | Form 4835, line 6 | No |
.Rental income may be recharacterized as non-passive. This can happen when income from rental property of which less than 30% of the unadjusted basis is subject to depreciation must be recharacterized as nonpassive. Be cautious of farmland rentals that may be subject to this provision. .
Using the guidance
Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.
Sources and further reading
- Publication 225 (2025), Farmer's Tax Guide: Farm Income — Rents — Internal Revenue Service; 2025 edition.
The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.