You cannot deduct personal expenses and certain other items on your
tax return even if they relate to your farm.
Personal, Living, and Family Expenses
You cannot deduct certain personal, living, and family expenses as
business expenses. These include rent and insurance premiums paid on
property used as your home, life insurance premiums on yourself or
your family, the cost of maintaining cars, trucks, or horses for
personal use, allowances to minor children, attorneys' fees and legal
expenses incurred in personal matters, and household expenses.
Likewise, the cost of purchasing or raising produce or livestock
consumed by you or your family is not deductible.
Other Nondeductible Items
You cannot deduct the following items on your tax return.
Loss of growing plants, produce, and crops.
Losses of plants, produce, and crops raised for sale are generally
not deductible. However, you may have a deductible loss on plants with
a preproductive period of more than 2 years. See chapter 13 for more
Repayment of loans.
Estate, inheritance, legacy, succession, and gift taxes.
Loss of livestock.
You cannot deduct as a loss the value of raised livestock that die
if you deducted the cost of raising them as an expense.
Losses from sales or exchanges between related persons.
You cannot deduct losses from sales or exchanges of property
between you and certain related persons, including your spouse,
brother, sister, ancestor, or descendant. For more information, see
chapter 2 of Publication 544,
Sales and Other Dispositions of
Cost of raising unharvested crops.
You cannot deduct the cost of raising unharvested crops sold with
land owned more than one year if you sell both at the same time and to
the same person. Add these costs to the basis of the land to determine
the gain or loss on the sale. For more information, see Section
1231 Gains and Losses in chapter 11.
Cost of unharvested crops bought with land.
Capitalize the purchase price of land, including the cost allocable
to unharvested crops. You cannot deduct the cost of the crops at the
time of purchase. However, you can deduct this cost in figuring net
profit or loss in the tax year you sell the crops.
Cost related to gifts.
You cannot deduct costs related to your gifts of agricultural
products or property held for sale in the ordinary course of your
business. The costs are not deductible in the year of gift or any
later year. For example, you cannot deduct the cost of raising cattle
or the cost of planting and raising unharvested wheat on parcels of
land given as a gift to your children.
Club dues and membership fees.
Generally, you cannot deduct amounts you pay or incur for
membership in any club organized for business, pleasure, recreation,
or any other social purpose. This includes country clubs, golf and
athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs
operated to provide meals under circumstances generally considered to
be conducive to business discussions.
The following organizations will not be treated as a club organized
for business, pleasure, recreation, or other social purposes, unless
one of its main purposes is to conduct entertainment activities for
members or their guests or to provide members or their guests with
access to entertainment facilities.
- Boards of trade.
- Business leagues.
- Chambers of commerce.
- Civic or public service organizations.
- Professional associations.
- Trade associations.
Fines and penalties.
You cannot deduct fines and penalties, except penalties for
exceeding marketing quotas, discussed earlier.