What is Schedule F and who needs to file it?

Schedule F (Form 1040), titled "Profit or Loss From Farming," is the IRS form used by sole proprietor farmers to report farm income and expenses. You must file Schedule F if you: operate a farm or ranch as a sole proprietor, grow crops or raise livestock for sale, receive agricultural program payments, or operate a single-member LLC taxed as a sole proprietorship engaged in farming. Schedule F reports: gross farm income (sales of livestock, crops, and agricultural products), farm expenses by category (feed, seed, fertilizer, veterinary, labor, depreciation), and calculates net farm profit or loss. The net profit flows to Form 1040 and is subject to both income tax and self-employment tax. If you operate multiple farms, you may need separate Schedule F forms or consolidated reporting depending on your business structure.

How does MACRS depreciation work for farm equipment and livestock?

MACRS (Modified Accelerated Cost Recovery System) is the IRS-required depreciation method for farm assets. Recovery periods for common farm assets: Farm machinery and equipment - 7 years, Single-purpose agricultural structures - 10 years, Farm buildings - 20 years, Cattle and dairy cows - 5 years (GDS) or 7 years (ADS), Hogs - 3 years, Horses (non-racing) - 7 years. For 2025, Section 179 allows expensing up to $2,500,000 of qualifying farm equipment in the year of purchase. Bonus depreciation dropped to 80% in 2025 (from 100% in prior years). Important: Depreciation for livestock begins when the animal reaches maturity (can be bred, milked, or worked). Livestock held primarily for sale must be treated as inventory, not depreciated. Farm accounting software automates these calculations and tracks asset basis for accurate tax reporting.

What is the difference between cash and accrual accounting for farms?

Cash basis accounting records income when received and expenses when paid. Most farmers use cash basis because it offers tax planning flexibility—you can prepay next year's inputs in December to reduce current taxes, or delay grain sales until January to defer income. You must use accrual accounting if your farm is a corporation with gross receipts of $26 million or more annually. Accrual accounting records income when earned and expenses when incurred, providing more accurate profit measurement by matching revenues to production periods. Accrual requires accurate inventory counts and valuations for stored crops, feed, and breeding livestock at year-end. Hybrid methods combining elements of both are also permitted. You choose your accounting method when filing your first Schedule F; changing methods later requires IRS approval.

What is enterprise accounting for farms?

Enterprise accounting tracks profitability separately for each distinct agricultural operation (enterprise) within your farm. If you grow corn and soybeans while also running a cow-calf operation and custom farming services, enterprise accounting reveals which activities generate profit and which lose money. The Farm Financial Standards Council recommends mapping: Revenue by enterprise (corn, soybeans, hay, livestock, custom work), Expenses by category within each enterprise (seed, feed, fertilizer, chemicals, labor, fuel, repairs), and Direct vs overhead costs allocation. Enterprise accounting helps identify where management changes can improve profitability—perhaps your corn operation is profitable but soybeans are losing money due to input costs. Farm accounting software like CenterPoint and specialized modules in QuickBooks can track enterprises separately.

What is the best free farm accounting software?

Wave is the best free general accounting software that farmers can adapt for basic operations. Wave offers: free double-entry accounting, unlimited invoicing, bank connections, and profit/loss reports. However, Wave lacks farm-specific features like Schedule F categorization, MACRS depreciation tracking, and livestock inventory. For budget-conscious farmers needing farm-specific features, consider: FarmRaise Tracks (free basic tier) for expense tracking aligned with Schedule F categories, Quicken Home & Business (one-time purchase ~$100) for sole proprietor farmers with simple operations, or FarmBooks ($595 one-time + $95/year maintenance) as a mid-tier option. The free options work for small operations but larger farms with multiple enterprises, breeding stock depreciation, and complex inventories benefit from dedicated farm accounting software like CenterPoint despite the higher cost.

How do I track livestock for tax purposes?

Livestock tax treatment depends on the animal's purpose: Livestock held for sale (feeder cattle, market hogs) must be included in inventory using cost or market value—no depreciation allowed. Livestock held for draft, breeding, or dairy purposes can be depreciated OR included in inventory—choose one method. Raised breeding stock (animals you bred and raised) may have $0 basis for depreciation; purchased breeding stock uses purchase price as basis. MACRS depreciation begins when livestock reaches maturity. Recovery periods: Cattle and dairy cows - 5 years GDS/7 years ADS, Hogs - 3 years, Sheep and goats - 5 years. When breeding stock is sold, gains may qualify for capital gains treatment if held over 12 months (24 months for cattle and horses). Farm accounting software tracks each animal's classification, basis, depreciation, and holding period for accurate Schedule F and Form 4797 reporting.

What features should farm accounting software have?

Essential farm accounting software features include: Schedule F Integration (automatic categorization matching IRS expense lines), Enterprise Accounting (track profitability by crop, livestock type, or operation), MACRS Depreciation Calculator (farm equipment, structures, breeding stock with correct recovery periods), Inventory Management (crops, feed, livestock with beginning/ending year valuations), Cash and Accrual Support (flexibility to choose method and track inventory adjustments), Equipment and Asset Tracking (purchase date, basis, accumulated depreciation, disposition), Payroll for Farm Labor (H-2A visa workers, seasonal help), and Bank Connection (import transactions from farm operating and equipment loan accounts). Advanced features include: integration with precision ag platforms (John Deere Operations Center, Climate FieldView), carbon footprint tracking for sustainability reporting, and multi-farm or entity support. QuickBooks offers general accounting with farm add-ons; FarmBooks and CenterPoint provide native farm features.

Agricultural Finance Guide

Best Farm Accounting Software 2025

Compare farm accounting software for Schedule F tax reporting, MACRS depreciation, livestock tracking, and enterprise accounting. QuickBooks, FarmBooks, and CenterPoint reviewed.

Try for one week Compare Software

$2.5M

Section 179 Limit 2025

80%

Bonus Depreciation 2025

$127K

Avg Farm Net Income 2025

5-7 yr

Cattle Depreciation

Farm Accounting Software Comparison 2025

Compare features for Schedule F reporting, depreciation tracking, and livestock management

Software	Price	Best For
QuickBooks Online	$30-200/month	General accounting with farm add-ons
FarmBooks	$595 one-time	Small-mid farms on a budget
CenterPoint	Contact for quote	Medium to large farms
FarmRaise Tracks	Free - $20/month	Basic expense tracking
Zera Books	$79/month	Bank statement processing

MACRS Depreciation for Farm Assets

IRS-required depreciation recovery periods for farm equipment, livestock, and structures. 2025 Section 179 limit: $2,500,000. Bonus depreciation: 80%.

Farm Asset	GDS Recovery	ADS Recovery	Method
Farm Machinery & Equipment	7 years	10 years	200% DB
Cattle (Breeding/Dairy)	5 years	7 years	200% DB
Hogs	3 years	4 years	200% DB
Sheep & Goats	5 years	6 years	200% DB
Horses (Non-Racing)	7 years	12 years	200% DB
Single-Purpose Ag Structures	10 years	15 years	150% DB
Farm Buildings	20 years	25 years	150% DB
Fences	7 years	10 years	200% DB

Note: GDS = General Depreciation System (most common). ADS = Alternative Depreciation System (required for certain assets). Livestock depreciation begins when animals reach maturity (can be bred, milked, or worked). Raised livestock may have $0 basis.

Schedule F Expense Categories

Farm accounting software should categorize expenses to match these IRS Schedule F lines. Proper categorization maximizes deductions and simplifies tax filing.

Line 12

Car and Truck Expenses

Farm trucks, ATVs for farm use

Line 13

Chemicals

Pesticides, herbicides, fungicides

Line 15

Custom Hire

Custom harvesting, custom planting

Line 16

Depreciation

Equipment, buildings, breeding stock

Line 18

Feed

Livestock feed, supplements, minerals

Line 19

Fertilizers and Lime

Nitrogen, phosphorus, potassium

Line 21

Insurance (Non-Health)

Crop insurance, liability, equipment

Line 22

Interest

Operating loans, equipment loans, real estate

Line 23

Labor Hired

Seasonal workers, H-2A employees

Line 25

Repairs and Maintenance

Equipment repairs, building repairs

Line 26

Seeds and Plants

Seed corn, seed beans, transplants

Line 28

Utilities

Electric, gas, water for farm operations

Line 29

Veterinary, Breeding, Medicine

Vet bills, AI services, vaccines

Cash vs Accrual Accounting for Farms

Cash Basis

Most Common for Farms

Record income when received, expenses when paid
Prepay inputs in December to reduce current-year taxes
Delay grain sales to January to defer income
No formal inventory tracking on Schedule F
Maximum tax planning flexibility

Accrual Basis

Required for Large Corps

Record income when earned, expenses when incurred
Matches revenue to production periods accurately
Requires year-end inventory counts and valuations
Required if gross receipts exceed $26 million
Better for financial analysis and lending

Enterprise Accounting

Track profitability separately for each crop, livestock operation, and custom service. Enterprise accounting reveals which activities make money and which need improvement.

Corn Enterprise+$42,000

Soybean Enterprise+$28,500

Cow-Calf Operation+$18,200

Custom Harvesting+$12,800

What Enterprise Accounting Tracks

Revenue by Enterprise

Corn, soybeans, hay, livestock, custom work

Direct Expenses

Seed, feed, fertilizer, chemicals per enterprise

Labor Allocation

Hours and costs by crop or livestock operation

Overhead Distribution

Equipment, buildings, insurance allocation

Farm Accounting Software FAQ

Common questions about farm financial management, Schedule F, and agricultural accounting

Farm accounting software is specialized financial management software designed for agricultural operations including farms, ranches, and agribusinesses. Unlike general accounting software, farm-specific solutions handle unique agricultural requirements: Schedule F (Form 1040) tax reporting for sole proprietor farmers, enterprise accounting to track profitability by crop or livestock type, MACRS depreciation for farm equipment and breeding stock, inventory management for harvested crops and livestock, and cash vs accrual accounting flexibility. Popular options include FarmBooks ($595 one-time), CenterPoint Accounting for Agriculture, and QuickBooks with farm add-ons. Farm accounting software helps maximize deductions under IRS Publication 225 (Farmer's Tax Guide) while tracking the complex biological assets and seasonal income patterns unique to agriculture.

Related Resources

Bank Statement Converter

Convert farm bank statements to Excel for Schedule F

Industries Hub

Solutions for other industries and business types

Bank Statement Processing

Process statements from farm operating accounts

AI Transaction Categorization

Auto-categorize farm expenses for Schedule F

Small Business Solutions

Accounting solutions for small farm businesses

QuickBooks Import

Import farm transactions into QuickBooks

PDF to Excel Converter

Convert farm financial PDFs to Excel

Invoice Processing

Extract data from supplier and vendor invoices

Pricing

$79/month unlimited conversions for farms

Simplify Your Farm Bookkeeping

Convert farm bank statements to clean data for QuickBooks or your farm accounting software. Process operating accounts, equipment loans, and commodity sales in seconds.

Try for one week