Form 4835 Instructions: Reporting Farm Rental Income for Landlords

Form 4835, Farm Rental Income and Expenses, is the form you file when you own farmland, a tenant works it under a crop-share or livestock-share arrangement, and you do not materially participate in the farming operation for self-employment tax purposes.¹ You report your share-based income in Part I, your landlord expenses in Part II, and carry the net result to Schedule E. The form is not used for flat cash rent (that goes on Schedule E, Part I) and it is not used by tenants or by landlords who materially participate (they use Schedule F).²

Confirm You Belong on Form 4835

The form’s own header reads “Income Not Subject to Self-Employment Tax.” That is the whole point. Before you fill in a single line, be sure you fail the farm-specific material participation tests for SE tax. If you meet any one of the tests below, you file Schedule F instead and owe self-employment tax on the net.

You do at least three of the following: pay at least half the direct costs of producing the crop or livestock, furnish at least half the tools and equipment, advise or consult with the tenant on production decisions, or periodically inspect the production activities.
You regularly and frequently make management decisions that substantially affect the success of the farming operation.
You work 100 hours or more spread over five or more weeks in activities connected with agricultural production.
Considering everything you do, you are materially and significantly involved in the production of the farm commodities.

Fail all four and Form 4835 is the right form. Note that a separate, broader “material participation” definition applies later, under the passive activity loss rules. You can fail the SE-tax tests (correctly filing Form 4835) while still passing the passive activity tests, which affects how any loss is treated.

Records to Have in Front of You

Pull these before you start:

Settlement statements from co-ops, grain elevators, or brokers showing proceeds from your share of crops or livestock.
Any USDA or federal farm program payments you received directly as the landlord.
Crop insurance proceeds and federal crop disaster payment documentation.
Commodity Credit Corporation loan documents, including anything you forfeited.
Form 1099-PATR from any cooperative that paid you patronage dividends. Boxes 1, 2, 3, and 5 may need to be reported as farm rental income.
Landlord expense records: mortgage interest statements, property tax bills, insurance premium notices, repair invoices, and supply receipts. If the tenant paid it under your arrangement, it isn’t yours to deduct.

If you own depreciable farm buildings, equipment, or land improvements, you will also complete Form 4562 and carry the depreciation number to Form 4835.³

Part I: Reporting Your Income

Part I captures every dollar of farm rental income you received during the year.²

Line 1. Income from the production of livestock, produce, grains, and other crops. Your crop-share and livestock-share proceeds go here, taken from the settlement statements.
Lines 4a–4c. Commodity Credit Corporation loans. If you forfeited a CCC loan, report the full amount here even if you previously reported the loan proceeds as income.
Lines 5a–5d. Crop insurance proceeds and federal crop disaster payments. Report these in the year received. If you use the cash method and the crop damage occurred in the current year, you can elect to defer eligible proceeds to the following year by checking the box on Line 5c and attaching a statement. The election is all-or-nothing for the year: defer all eligible proceeds or none.
Line 7. Total gross farm rental income. Add lines 1 through 6. This same number also goes on Schedule E, Line 42.

One timing point that trips up cash-method filers: income is recognized when your share is converted to cash. Grain harvested in December but sold in January is next year’s income.

Part II: Reporting Your Expenses

Only expenses you paid as the landlord belong in Part II. When a cost is shared with the tenant, allocate and deduct only your portion. The main lines:²

Line 12. Depreciation and Section 179 expense not claimed elsewhere, carried from Form 4562.
Line 18. Insurance premiums on the farm property. This is property insurance, not health insurance.
Line 19a. Mortgage interest paid to banks or financial institutions.
Line 19b. Other interest on debt used for the farm property.
Line 23. Repairs and maintenance: fencing, building upkeep, drainage work.
Line 26. Supplies for upkeep or operation of the property.
Line 27. Real estate and other property taxes.

Anything that does not fit a designated line goes in the “Other expenses” section near Line 30, itemized and totaled. Keep the underlying invoices, tax statements, and interest records.

Line 31 totals your Part II expenses.

Line 32: Net Income or Loss

Subtract Line 31 from Line 7. A positive result is net farm rental income; a negative result is a loss.²

If you have net income, enter it on Line 32 and carry it to Schedule E, Line 40. Done with the form.

If you have a loss, do not stop. Continue to Line 34, where the passive activity rules decide how much of the loss you can actually deduct this year. The allowed loss from Line 34c is what you carry to Schedule E, Line 40.

How the Numbers Land on Your Return

Form 4835 doesn’t flow to Form 1040 directly. It routes through Schedule E:

Gross income from Line 7 goes to Schedule E, Line 42.
Net income from Line 32, or the allowed loss from Line 34c, goes to Schedule E, Line 40.

Schedule E adds this to your other supplemental income and totals it onto Schedule 1, which feeds Form 1040.

No Self-Employment Tax

Income on Form 4835 is not subject to self-employment tax.¹ You do not file Schedule SE for it, and you do not owe Social Security or Medicare tax on it. That is the whole reason the form exists as a separate reporting channel from Schedule F.

The 3.8% Net Investment Income Tax

The tradeoff is possible exposure to the Net Investment Income Tax. Rental income generally counts as net investment income, and the 3.8% NIIT applies when modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married filing jointly.⁴ The tax is calculated on Form 8960 and applies to the lesser of your net investment income or the amount your MAGI exceeds the threshold. The thresholds are not indexed for inflation.

If Line 32 Is a Loss: Passive Activity Rules

Form 4835 income is treated as a rental activity for passive activity loss purposes.² A net loss may be limited before you can deduct it against other income.

If you materially participate under the broader Publication 925 tests (for example, more than 500 hours in the activity during the year, or being the only real participant, or satisfying one of the other tests in Pub. 925), the loss is generally non-passive and fully deductible.⁵ Meeting these does not push you back into Schedule F territory, because they are a separate test from the farm-specific SE tax tests.

If the activity is passive to you, a special allowance can still help. Landlords who actively participate in the rental real estate activity may deduct up to $25,000 of passive rental losses against non-passive income.⁶ Active participation is a lower bar than material participation and includes approving tenants, setting rental terms, and approving repair spending. Your ownership must be at least 10% of the activity’s value. The $25,000 allowance phases out as modified AGI rises above $100,000 and disappears at $150,000.

Losses you cannot deduct this year carry forward. They can offset future passive income from the same activity, and any remaining suspended loss is generally deductible in full in the year you dispose of your entire interest in the property.

Do Not Put CRP Payments on Form 4835

Conservation Reserve Program annual rental payments are not rental income for federal tax purposes, even though the program uses the word “rental.”⁷ The government does not use or occupy the land, so it isn’t a rental in the tax sense.

CRP annual rental payments go on Schedule F, Line 4a, with the taxable amount on Line 4b, and they are subject to self-employment tax unless you are receiving Social Security retirement or disability benefits. CRP cost-sharing payments go on Schedule F, Line 4b, unless they qualify for the cost-sharing exclusion. Nothing CRP-related belongs on Form 4835 or Schedule E.

Filing Deadline for Farm Landlords

Farmers and fishermen who earn at least two-thirds of their gross income from farming or fishing can skip quarterly estimated tax payments by filing their return and paying any balance due by March 1. For 2026, that date shifts to March 2 because March 1 is a Sunday. File and pay by then and you avoid estimated tax penalties; if you owe no income tax, the standard April 15 deadline applies and there is no need to file early.

Whether Form 4835 income counts toward the two-thirds threshold depends on your full income picture. If farm rental is your main income, confirm with a tax professional before relying on the early-filing rule. Attach Form 4835 and Schedule E to your Form 1040 when you file.

1
Internal Revenue Service. About Form 4835, Farm Rental Income and Expenses
2
Internal Revenue Service. Form 4835 – Farm Rental Income and Expenses
3
Internal Revenue Service. Form 4562 – Depreciation and Amortization
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Internal Revenue Service. Topic No. 559, Net Investment Income Tax
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Internal Revenue Service. Publication 925 (2025), Passive Activity and At-Risk Rules
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Internal Revenue Service. Instructions for Form 8582 (2025)
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Internal Revenue Service. Conservation Reserve Program “Annual Rental Payments” and Self-Employment Tax