Pennsylvania PA Schedule F - Farm Income and Expenses

PA Schedule F - Farm Income and Expenses
PA Schedule F - Farm Income and Expenses (Form and Instructions) (PA-40 F)
Farm Income
and Expenses START
HERE

PA-40 F (EX) 09-23 (FI) ➜
PA Department of Revenue

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2303310052

PA SCHEDULE F

20

Include with Form
PA-40, PA-20S/PA-65 or PA-41

Name of owner as shown on PA tax return:

B Principal Product. Describe in one or two words your principal
crop or output for the current tax year.

t

t

A. Principal Agricultural Activity Code. Write the code that best describes your principal
income-producing activity. Codes are listed on the reverse side of this schedule.

If you disposed of commodities received under the payments-in-kind program, fill in the oval(s) that apply:

Feed for livestock
SECTION I

OFFICIAL USE ONLY

Owner’s
Social Security Number

Taxpayer Identification Number (not SSN)

C

Sold and reported in income

Farm Income—Cash Method—Complete Sections I and II

Sales Tax License Number (if applicable)

(Accrual method taxpayers complete Sections II and III and Line 12 of Section I.)

1. Sales of livestock and other items bought for resale
2. Cost or other basis of livestock and other items bought for resale
3. Subtract Line 2 from Line 1

1.
2.
3.

4. Sales of livestock, produce, grains, and other products raised

4.

5. a. Total distributions received from cooperatives (from Form 1099-PATR) 5a.
b. Less: Non-income items

5a
5b

5b.

6. Net distributions. Subtract Line 5b from Line 5a

6.

7. Agricultural program payments:
a. Cash

7a.

b. Materials and services

7b.

8. Commodity credit loans under election (or forfeited)

8.

9. Crop insurance proceeds

9.

10. Machine work

10.

t

11. Other income, including federal and state gasoline tax credit or refund, interest income, and sales of
operational assets
11.
12. Gross income. Add amounts on Lines 3, 4, 6, and 7a through 11. If using the accrual method, enter the
amount from Section III, Line 51
12.
Farm Deductions-Cash and Accrual Method. Do not include personal or living expenses. Reduce the amount
SECTION II
of your farm deductions by any reimbursements before entering the deduction.
13.
14.
15.
16.

Breeding fees
Chemicals
Conservation expenses
a. Regular depreciation
b. Section 179 expense

17. Employee benefit programs other than
those on Line 28
18. Feed purchased
19. Fertilizers and lime
20. Freight, trucking
21. Gasoline, fuel, oil
22. Insurance
23. a. Labor hired
b. Jobs credit
c. Balance (subtract Line 23b from
Line 23a)
24. Land clearing
25. Machine hire
26. Mortgage interest paid to financial
institutions

27. Other interest
28. Pension and profit-sharing plans for
employees
29. Rent of farm, pasture
30. Repairs, maintenance
31. Seeds, plants purchased
32. Storage, warehousing
33. Supplies purchased
34. Taxes
35. Utilities
36. Veterinary fees, medicine
37. Other expenses (specify):
a.
b.
c.
d.
e.
f.
37. Total other expenses
38. Total expenses (Add Lines 13
through 37.)

39. Net farm profit or loss Subtract Line 38 from Line 12. If a net loss is shown, fill in the oval.
Enter the result on your PA tax return.

Loss

39.

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2303410050

PA SCHEDULE F
Farm Income
and Expenses

START
HERE

PA-40 F (EX) 09-23 (FI)
PA Department of Revenue

Name of owner as shown on PA tax return:

20

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OFFICIAL USE ONLY

Social Security Number

➜
SECTION III

Farm Income—Accrual Method

40. Sales of livestock, produce, grains, and other products during year

40.

41. Agricultural program payments:
a. Cash

41a.

b. Materials and services
42. Commodity credit loans under election (or forfeited)

41b.
42.

43. Machine work

43.

44. Other income, including federal and state gasoline tax credit or refund
45. Total. Add amounts on Lines 40 through 44.

44.
45.

46. Inventory of livestock, produce, grains, and other products at beginning of
year

46.

47. Cost of livestock, produce, grains, and other products purchased during year 47.
48. Add Lines 46 and 47.

48.

49. Inventory of livestock, produce, grains, and other products at end of year

49.

Principal Agricultural Activity Codes
Select one of the following codes and write the four-digit number on
Line A on Page 1 of this schedule.
NOTE: If your principal source of income is from providing agricultural services such as soil preparation, veterinary, farm labor,
horticultural or management for a fee or on a contract basis,
you should file PA Schedule C.

t

50. Cost of livestock, produce, grains, and other products sold. Subtract Line 49 from Line 48.
51. Gross income. Subtract Line 50 from Line 45. Enter here and on Section I, Line 12.

50.
51.

0180

Horticultural specialty, including the growing of ornamental
floriculture and nursery products such as plants, shrubbery,
bulbs, flowers, sod, etc.

0211

Beef cattle feedlots

0212

Beef cattle, except feedlots

0215

Hogs, sheep, and goats

0240

Dairy

0250

Poultry and eggs, including chickens, ducks, pigeons, quail,
etc.

0120

Field crop, including grains and nongrains such as cotton,
peanuts, feed corn, wheat, tobacco, Irish potatoes, etc.

0260

General livestock, not specializing in any one livestock category

0160

Vegetables and melons, garden-type vegetables and melons, such as sweet corn, tomatoes, squash, etc.

0270

Animal specialty, including fur-bearing animals, pets, fish,
horses, etc.

0170

Fruit and tree nuts, including grapes, berries, olives, etc.

0300

Agricultural production, not specified.

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Instructions for PA-40 Schedule F

Farm Income and Expenses

PA-40 F IN (EX) 09-23

WHAT’S NEW
Section 179 Property Deduction - Act 53 of 2022 (Act 202253, P.L. 513, No. 53) amended the PA PIT law to increase
the PA PIT dollar limitation to match the FIT dollar limitation.
The amendment applies to § 179 Property placed in service
in tax years beginning on or after January 1, 2023. Refer to
Personal Income Tax Bulletin 2023-02 for further
information.

(iv) Dairy farming. The business of breeding, feeding, and
raising cattle and other milk producing animals, and the
production of feed for them by the owner of the animals. This
doesn’t include operations such as pasteurizing or
homogenizing or the making of butter, cheese, and ice
cream. These activities should be reported on PA Schedule
C.
(v) Fur-ranching. The propagation and raising of ranch
raised fur-bearing animals.

Like-Kind Exchanges: Effective January 1, 2023, the deferral
of tax due on gains from like-kind exchanges of property are
allowed.

(vi) Propagation of game birds. The propagation of game
birds for commercial purposes by holders of propagation
permits issued under 34 Pa.C.S. § § 101—2965 of the
Game and Wildlife Code.

OVERVIEW

(vii) Propagation of aquatic animals. The propagation of fish
and other aquatic animals for commercial use as a food or
food product by holders of propagation permits issued under
30 Pa.C.S. § § 101—7314 of the Fish and Boat Code.

Use PA Schedule F to report income or loss from a business
you operate as a farm. The following definitions may be
helpful in determining if you should file a PA Schedule C or
PA Schedule F:
Farming - The following activities, when engaged in as a
regular business:
(i) Agriculture. The business of producing food products or
other useful or valuable growths or crops by tilling and
cultivating the soil, and by breeding, raising, and feeding
cattle, livestock, bees, poultry, or other animals that produce
a food product or are themselves a food product. For
example, the commercial raising of mushrooms is farming,
but gardening and similar noncommercial activities are not
farming. The following are not included within the definition
of agriculture:
(A) The breeding or raising of dogs, cats, and other pets;
or game animals, birds, fish, or other animals
intended for use in sporting or recreational activities
such as, but not limited to, hunting, fishing, show
competition, and racing.
(B) The operation of stockyards or slaughterhouses.
(ii) Horticulture. The business of producing vegetables,
vegetable plants, fruits, and nursery stock, including the
operation of commercial vegetable greenhouses and
nurseries. Horticulture does not include the business of
servicing plants owned by other persons.
(iii) Floriculture. The business of producing flowers and
decorative or shade trees, plants, and shrubs in the field,
nursery, or greenhouse. The raising of trees as timber or
lumbering and logging or sawmill operations are not included
in the definition of floriculture.

For more information regarding the definition of a business,
profession, or farm activity and for Pennsylvania’s
requirements for reporting income and expenses, visit
www.revenue.pa.gov.
NOTE: Pennsylvania determines income and loss
under those accounting principles, systems, and
practices acceptable by standards of the accounting
profession and consistent with the regulations of the
department.
Pennsylvania does not generally follow federal tax
accounting rules to determine income or loss. You may use
any accounting method for PA purposes, as long as you
apply accounting methods consistently.
Pennsylvania does not allow Farm Income Averaging.
A farmer may deduct all losses in the taxable year realized.
Report all transactions directly related to your farming
operation on PA Schedule F.
You should maintain separate books and records for PA
Personal Income Tax (PIT) purposes. You may usually use
your Federal Schedule F expenses for PA PIT purposes.
However, you may not use federal amounts if you made
certain elections to accelerate or defer income and
expenses or spread expenses over more than one taxable
year. To take advantage of the Pennsylvania reporting
differences that decrease your federal profit, complete PA
Schedule F.
The Federal Schedule F instructions for the following federal
schedules do not apply:

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SCHEDULE SE
Do not report self-employment taxes to Pennsylvania.
FORM 4684
Report gain or loss from all business activity on PA Schedule
F. Include a casualty or theft loss (or gain, if insurance
proceeds exceed the basis of the property lost or taken) of
business property on Line 11 of PA Schedule F. Reference
the federal schedule as the explanation for the gain or loss
item, but do not submit the federal schedule with your PA tax
return.
FORM 4835
Report rental income from farm production or crop shares
whether or not you materially participate in the production of
that income as rental income on PA Schedule E.
Pennsylvania does not have "materially participating" rules.
An owner may deduct all losses in the taxable year realized.
Only report on PA Schedule F the income, expenses, and
profit or loss from the operation of your farm enterprise.
FORM 8824
Like-Kind Exchanges: Effective January 1, 2023, the deferral
of tax due on gains from like-kind exchanges of property are
allowed.
Act 2022-53 : applies to exchanges of property that occur in
tax years beginning after December 31, 2022. Therefore,
any Pennsylvania personal income tax gain/income from the
exchange of properties is deferred if gain/income is deferred
for the same exchange for federal income tax purposes
under IRC § 1031. Report any gain or loss from any sale,
exchange, or disposition on Line 11 of PA Schedule F, if the
transaction was a normal business transaction. Report any
gain or loss from other dispositions (nonbusiness) on PA
Schedule D.
If you own or operate more than one farm or farming
operation, you must submit a separate PA Schedule F for
each operation.

OTHER PENNSYLVANIA AND
FEDERAL INCOME TAX DIFFERENCES
PA income from farming generally differs from the income
determined for federal income tax purposes. Further,
Pennsylvania will no longer accept a PA Schedule C-F
Reconciliation for the purpose of adjusting the federal farm
income to PA farm income. Therefore, the items which were
previously included as additions to PA income or expenses
on the PA Schedule C-F Reconciliation should be included
with the specific line of income or expense on PA Schedule
F. In addition, those items which Pennsylvania does not
require be reported as income or does not allow as expense
in determining net farm income, which are allowed in the
determination of net federal farm income, should not be
included in the specific farm income or expenses on PA
Schedule F.
Examples of items that Pennsylvania requires as additions
to income include: any advance receipts for goods or
2

services; working capital interest or dividend income
including federal-exempt interest and dividend income from
obligations of other states; gains from the sale of business
assets where the property is replaced by similar property;
gains from involuntary conversions (such as those from IRC
Section 1033); and gains from the sale of property where PA
basis is different than federal basis.
Examples of items that Pennsylvania allows as additions to
expenses that required a reduction for federal tax purposes
include: meals, travel, and entertainment expense deduction
of 100 percent by Pennsylvania for the expenses incurred;
any differences in depreciation related to differences in basis
of assets, amount of allowable Section 179 expense, or
method of depreciation for federal or PA purposes; and any
other reductions in federal expenses allowed at 100 percent
for PA personal income tax purposes.
Examples of items that Pennsylvania requires as reductions
in federal income or expenses include: income taxes based
upon gross or net income; any differences in depreciation
related to differences in basis of assets, amount of allowable
Section 179 expense, or method of depreciation for federal
or PA purposes; recognition of cancellation of debt income;
recognition of income from IRC Section 481(a) spread
adjustments; payments for owner pension, profit-sharing
plans, deferred, or welfare benefit plans; percentage
depletion; direct expensing of organizational expenses or
syndication fees; losses from the sale of property where PA
basis is different than federal basis; and any other income
or expenses where there is a specialized federal treatment
that is not specifically addressed or allowed by PA personal
income tax law that might involve additional expensing,
expensing verses capitalization, carry back or carry forward
of losses, income recognition, or other special treatments.
Pennsylvania is not a community property state. Therefore,
for PA personal income tax purposes, a taxpayer and the
taxpayer’s spouse must each report on a separate PA
Schedule F their share of the income and expenses from a
farm entity they own that is considered a qualified joint
venture for federal income tax purposes.

SPECIFIC INSTRUCTIONS
ROUNDING
Enter amounts in whole-dollars only. Eliminate any amount
less than $0.50 and increase any amount that is $0.50 or
more to the next highest dollar.

LINE INSTRUCTIONS
LINE A
PRINCIPAL AGRICULTURAL ACTIVITY CODES
Enter the four-digit code that best describes your principal
income producing activity. If your principal source of income
is from providing agricultural services such as soil
preparation, veterinary, farm labor, horticultural, or

PA-40 F

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management for a fee or on a contract basis, use the most
appropriate Principal Agricultural Activity Code shown on
Side 2 of the PA Schedule F.

LINE B
PRINCIPAL PRODUCT
Describe in one or two words your principal crop or output
for the current year.
DISPOSITION OF PAYMENTS-IN-KIND COMMODITIES
If you disposed of commodities received under the
payments-in-kind program, fill in the oval for the
description(s) that apply.
Enter your federal Employer Identification Number (FEIN).
If you do not have an FEIN, leave this space blank.
Enter your PA Sales Tax License Number if you have one,
or leave this space blank.

SECTION I
FARM INCOME - CASH METHOD COMPLETE SECTIONS I AND II

LINES 5a and 5b
On Line 5a, show your total distributions from cooperatives,
including patronage dividends, nonpatronage distributions,
per-unit retain allocations, and redemption of nonqualified
notices and per-unit allocations.
Show patronage dividends (distributions) received in cash
and the dollar amount of qualified written notices of
allocation. If you received property as patronage dividends,
report the fair market value of the property as income.
On Line 5b, enter patronage dividends from buying personal
or family items, capital assets, or depreciable assets.

LINE 7b
MATERIALS AND SERVICES
Include the amount from 1099-G, Box 9, Market Gain,
associated with any Commodity Credit Corporation (CCC)
loan where the proceeds from the loan were not originally
elected to be included as income. Write ”Market Gain” in the
space to right of “Materials and services” when including an
amount from this source. Include a schedule if more than
one type of income is reported on this line.

LINE 11
OTHER INCOME
Enter gross proceeds you may have to report elsewhere on
your federal tax return. Include the income from the sale of
business assets you reinvested and used to acquire similar
business assets. Also include the gain or loss on replacing
business property (including land or buildings used by the
facility in the operation of a farm) and interest and dividend

income from investments that generated working capital.
Include other income as described for Line 8 of Federal
Schedule F. PA PIT law and regulations do not limit
depreciation when business property use (or the inclusion
amount on leased property adjustment) falls below 50
percent. You may deduct the allowable business
depreciation as described below on such property. Do not
report "depreciation recapture" for PA Personal Income Tax
purposes. Do not include income from oil and gas well
royalties, well access easements or right-of-ways as other
income on PA Schedule F - even if the well is located on the
farm property. Oil and gas royalty payments should be
reported on PA Schedule E along with any temporary
easement or right-of-way payments. Payments for oil and
gas pipeline or well access express easements (15 years or
longer) or permanent right-of-ways should be reported on
PA Schedule D. Payments from oil and gas producers for
crop damage should be included as other income on PA
Schedule F. All payments for crop damage are reportable in
the year they are received even if the payment is based
upon multiple years of damages.

SECTION II
FARM DEDUCTIONS - CASH AND ACCRUAL METHOD
Include current expenses that are ordinary, necessary and
reasonable for producing farming income. Do not include
personal or living expenses. PA law does not impose dollar
or percentage limitations on allowable expenses. You may
always deduct 100 percent of the PA allowable farm
expenses that you incurred during the taxable year.

LINE 15
CONSERVATION EXPENSES
You may deduct certain expenditures (including any amount
paid on any assessment levied by a soil or water
conservation or drainage district to defray expenditures
made) for soil or water conservation and the prevention of
erosion if the expenditures are in respect of land you use.
The allowable deduction for any one year may not exceed
25 percent of your gross income from farming, but any
excess may be carried over to succeeding years with the
same limit applying to those years.
To claim a deduction for these expenditures, you must elect
to do so by claiming the deduction on your return for the first
taxable year for which the expenditures are paid. Once you
have elected to treat the expenditures as deductions, you
must continue to do so in all future taxable years unless you
secure consent to change.

LINE 16a
REGULAR DEPRECIATION
You may use any depreciation method permissable under
accepted accounting principles and practices as long as you
consistently apply the method.

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NOTE: For each asset, you must also report straightline depreciation, unless not using an optional
accelerated depreciation method. You need straight-line
depreciation to take advantage of Pennsylvania’s Tax
Benefit Rule when you sell the asset.
You must use the straight-line depreciation method if your
PA basis and federal a basis for an asset differ.

LINE 16b

LINE 27
OTHER INTEREST
Do not deduct personal interest. If you personally borrow
money to acquire a farm or farm interest or to improve your
farm, you may not deduct the interest on any PA schedule
or tax return. If the farm business itself incurs debt, it may
deduct the interest expense.

LINE 34

SECTION 179 EXPENSE
For § 179 Property placed in service before 2023, the PA
PIT dollar limitation is based upon earlier of the IRC § 179
dollar limitation at the time the § 179 Property was placed in
service or the IRC § 179 dollar limitation in effect in 2003.
The applicable PA PIT dollar limitations for those years are
as follows:
1997: $18,000
1998: $18,500
1999: $19,000
2000: $20,000
2001-02: $24,000
2003-22: $25,000

TAXES
You may deduct tax expenses other than taxes based on
income. You may not deduct taxes based on net income,
federal income taxes, and one-half of the self-employment
taxes that the IRS allows. You may not deduct taxes paid to
other states or foreign countries based on income. You may
not deduct estate taxes and inheritance, legacy, succession,
and gift taxes. Assessments for betterments and
improvements are not allowable.

Act 53 of 2022 (Act 2022-53, P.L. 513, No. 53) amended the
PA PIT law to increase the PA PIT dollar limitation to match
the FIT dollar limitation. The amendment applies to § 179
Property placed in service in tax years beginning on or after
January 1, 2023. Refer to the Personal Income Tax Bulletin
2023-02 for additional information.

OTHER EXPENSES
You may deduct any other cost of operations that are
ordinary, necessary, reasonable, and current expenses of
your farm business.

LINE 17
EMPLOYEE BENEFIT PROGRAMS
OTHER THAN ON LINE 28
You may not deduct any payments you make for your own
personal coverage.

LINE 22
INSURANCE
You may deduct life insurance on yourself or your spouse
only if the farm business itself (not your spouse, other family
members or other persons) is the beneficiary. The farm
business must use the insurance proceeds to continue its
operations. If deducting insurance premiums, proceeds
received are business income on Line 11 of Section I.

LINE 23
LABOR HIRED
Do not reduce your wage expense for any federal credits
you claim. Add back any wage expenses you excluded to
claim a federal credit. Do not deduct the costs of your own
participation.
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PA-40 F

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LINE 37

• You may deduct 100 percent of the sales tax paid on a
depreciable asset. However, on disposition, your PA basis
and federal basis for that asset will differ.
• You may deduct charitable contributions made from your
farm account and acknowledged publicly by the recipient.
Personal charitable contributions are not allowable.
• You may use the capitalization rules established by your
industry, under its generally accepted accounting
principles and practices. Once elected, you must
consistently use this method.
• You may deduct 100 percent of expenses for removing
barriers to individuals with disabilities and the elderly. You
may not take the federal credit on your PA return.
• You may deduct home office expenses. Pennsylvania
generally follows the federal rules for a home office.
However, Pennsylvania does not permit the use of the
federal safe harbor method for determining the expense.
Actual expenses must be used to calculate the expense.
• Itemize any other expenses that are allowable under
GAAP or FASB rules but are not allowable or limited under
federal rules.
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