How to Complete PA Schedule F: Farm Income and Expenses (PA-40 F)

PA Schedule F is the Pennsylvania form you attach to your PA-40 Personal Income Tax Return to report income and expenses from a farming operation. Net farm profit is taxed at Pennsylvania’s flat 3.07 percent rate,1Commonwealth of Pennsylvania. Personal Income Tax and the state’s rules for depreciation, losses, and accounting differ from the federal rules in ways that trip up filers who copy their federal Schedule F numbers straight across. The form is a PDF available from the Department of Revenue at revenue.pa.gov.

Who Files PA Schedule F

Any individual, estate, trust, or partner receiving income from a farming operation files PA Schedule F. Net profits from operating a farm are one of Pennsylvania’s eight taxable classes of income, so the schedule is required whether farming is your main livelihood or a side activity.2Pennsylvania General Assembly. Pennsylvania Code 72 PS 7303 – Classes of Income

The Department defines farming broadly: agriculture, horticulture, floriculture, dairy farming, fur-ranching, game bird propagation, and aquatic animal propagation all count when conducted as a regular business.3Pennsylvania Department of Revenue. PA Schedule F – Farm Income and Expenses If your activity fits any of these categories, it goes on Schedule F rather than PA Schedule C.

One boundary worth noting up front: livestock held for breeding, dairy, or draft purposes is not Schedule F property. Those sales go on Form 4797 (Sales of Business Property). Cattle and horses must be held at least 24 months and other livestock at least 12 months to qualify for long-term capital gain treatment; sales before that holding period still go on Form 4797 but are treated as ordinary income.

Where Pennsylvania Rules Diverge From Federal

This is where most Schedule F errors happen. Pennsylvania does not piggyback on your federal numbers.

Depreciation and Section 179

Pennsylvania does not allow federal bonus depreciation for personal income tax purposes. If you claimed bonus depreciation federally, add it back and use a standard method for PA.4Commonwealth of Pennsylvania. Net Income (Loss) from the Operation of a Business, Profession or Farm

The Section 179 deduction is capped at $25,000 for Pennsylvania regardless of the federal limit (which is $2,560,000 for 2026). The $25,000 cap applies across all of your business enterprises and income-producing properties combined, not per business. If you expensed $100,000 of equipment federally under Section 179, only $25,000 flows through to your PA Schedule F.4Commonwealth of Pennsylvania. Net Income (Loss) from the Operation of a Business, Profession or Farm

If you did not use a farm loss on your PA return in a prior year, the Department requires straight-line depreciation on those business assets going forward, even if you used an accelerated method federally.

No Farm Income Averaging

Federal law lets farmers average income over three years to smooth out volatile crop years. Pennsylvania does not. Net farm profit is taxed entirely in the year earned.3Pennsylvania Department of Revenue. PA Schedule F – Farm Income and Expenses

Losses Cannot Offset Other Income

A net loss from farming cannot offset wages, interest, rental income, or any other income class. It also cannot be carried forward or backward to another tax year.5Pennsylvania Department of Revenue. PA Income Tax Rules for Offsetting Losses Against Gains A farm loss can only offset farm gains within the same tax year. If your only farm activity produced a loss, the taxable amount for the class is zero and the loss disappears for PA purposes.

Accounting Method

Pennsylvania does not generally follow federal tax accounting rules. Use any method consistent with accepted accounting standards, and apply it consistently year to year. The form has separate cash and accrual sections; pick the one that matches how you actually track the farm.3Pennsylvania Department of Revenue. PA Schedule F – Farm Income and Expenses

Records to Gather Before You Start

Before opening the form, pull together:

  • Sales records for all livestock, produce, grain, and other products sold.
  • Purchase invoices for any livestock or items you bought specifically to resell.
  • Form 1099-PATR from any cooperative that distributed patronage dividends.6Internal Revenue Service. Instructions for Form 1099-PATR
  • Documentation of agricultural program payments (cash and materials), commodity credit corporation loans, and crop insurance proceeds.
  • Expense invoices for feed, seed, fertilizer, chemicals, fuel, veterinary services, labor, repairs, insurance, rent, and utilities.
  • A PA-specific depreciation schedule for farm assets, since your federal schedule likely uses bonus depreciation or a higher Section 179 limit that PA does not recognize.
  • Your federal Schedule F as a reference, understanding that several lines will need adjustment.

Keep supporting records for at least three years from the filing date. Pennsylvania can audit within that window.

Completing the Income Section

Cash-method filers use Section I, Lines 1–12. Accrual-method filers use Section III, Lines 40–51, which captures the same revenue categories plus beginning and ending inventory. The walkthrough below follows the cash-method lines.3Pennsylvania Department of Revenue. PA Schedule F – Farm Income and Expenses

Lines 1–3 handle livestock and other items you bought for resale: total sales on Line 1, cost or other basis on Line 2, net gain on Line 3. Livestock you raised from birth belongs on a different line.

Line 4 is for sales of livestock, produce, grains, and other products you raised yourself. For most crop and livestock operations, this is the largest income line.

Lines 5–6 capture cooperative distributions. Enter the total from your 1099-PATR on Line 5a, subtract non-income items on Line 5b, and carry the net to Line 6.

Lines 7–9 pick up government agricultural program payments (cash and materials), commodity credit loans you elected to report or that were forfeited, and crop insurance proceeds.

Lines 10–11 cover machine work income (custom work you did for others) and other income, including state and federal gasoline tax refunds and sales of operational assets.

Line 12 totals the income lines for your gross farm income. Round every amount to whole dollars: drop amounts under fifty cents and round up amounts of fifty cents or more.

Completing the Expenses Section

Section II runs from Line 13 through Line 38 and covers deductible farm expenses category by category.3Pennsylvania Department of Revenue. PA Schedule F – Farm Income and Expenses

  • Lines 13–15: breeding fees, chemicals, and conservation expenses. Conservation expenses cannot exceed 25 percent of gross farm income; any excess carries over to future years under the same cap.
  • Line 16a–b: depreciation split into regular depreciation (16a) and Section 179 expense (16b). Apply the $25,000 PA Section 179 cap and remove any bonus depreciation.
  • Lines 17–22: employee benefit programs, feed purchased, fertilizers and lime, freight and trucking, gasoline and fuel, and insurance.
  • Lines 23a–c: hired labor, minus any jobs credit, for a net labor cost.
  • Lines 24–28: land clearing, machine hire, mortgage interest paid to financial institutions, other interest, and pension or profit-sharing plans for employees.
  • Lines 29–36: rent, repairs and maintenance, seeds and plants, storage, supplies, taxes, utilities, and veterinary fees and medicine.
  • Line 37: other expenses not covered by the named categories. Six sub-lines (a–f) let you specify these; list them clearly in case of audit.
  • Line 38: total of all expense lines.

If you use a vehicle for farm business, you can deduct either actual costs (fuel, insurance, repairs, depreciation) or the standard mileage rate. The 2026 federal business standard mileage rate is 72.5 cents per mile.7Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile, Up 2.5 Cents Whichever method you use, keep a mileage log that separates personal and farm use.

Net Profit or Loss

Line 39 is the bottom line: subtract total expenses (Line 38) from gross income (Line 12). A positive result transfers to the net profits line of your PA-40, taxed at 3.07 percent.1Commonwealth of Pennsylvania. Personal Income Tax A loss requires filling in the loss oval and entering the amount, but that loss can only reduce other farm income on the same return.5Pennsylvania Department of Revenue. PA Income Tax Rules for Offsetting Losses Against Gains

Accrual-method filers arrive at gross income on Line 51 instead of Line 12, then run the same expense section and Line 39 calculation.

Filing, Extensions, and Estimated Payments

PA Schedule F is not filed on its own. Attach it to your PA-40, which is due April 15 following the close of the tax year.

The Department’s myPATH portal at mypath.pa.gov handles online filing of the PA-40 and its schedules, and approved commercial tax software is also accepted. Electronic returns process faster than paper.8Pennsylvania Department of Revenue. myPATH Portal

To file on paper, attach the printed schedule to your PA-40 and mail it to one of two addresses, depending on whether you owe:9Pennsylvania Department of Revenue. To What Address Do I Mail My PA-40 Personal Income Tax Return

  • Payment enclosed: PA Department of Revenue, 1 Revenue Place, Harrisburg, PA 17129-0001.
  • Refund requested: PA Department of Revenue, 3 Revenue Place, Harrisburg, PA 17129-0003.

Extensions

Pennsylvania grants up to a six-month extension to file, but not to pay. Any tax owed is still due April 15. If you have a federal extension and owe no PA tax, the Department grants the same extension automatically. If you owe PA tax, submit Form REV-276 with your payment to the PA Department of Revenue, Bureau of Individual Taxes, PO Box 280504, Harrisburg, PA 17128-0504, or pay and request the extension through myPATH.10Commonwealth of Pennsylvania. Extension of Time to File

Estimated Payments for Farmers

If two-thirds or more of your gross income comes from farming, you qualify for a simplified estimated payment schedule that mirrors the federal approach.11Pennsylvania Department of Revenue. Estimated Payments – Customer Service Center Federally, qualifying farmers can make a single estimated payment by January 15 following the tax year or skip estimated payments entirely by filing the return and paying in full by March 1.12Internal Revenue Service. Farming and Fishing Income For 2026, the federal estimated deadline is January 15, 2027, and the file-and-pay alternative is March 1, 2027. Check the PA-40 ES instructions for corresponding Pennsylvania deadlines, which generally follow a similar structure. If you don’t meet the two-thirds threshold, the standard quarterly schedule applies, starting April 15 of the tax year.

Penalties for Late or Incorrect Filing

The Department imposes:13Commonwealth of Pennsylvania. Income Subject to Tax Withholding; Estimated Payments; Penalties, Interest and Other Additions

  • Late filing penalty: 5 percent of unpaid tax per month or partial month, up to 25 percent, minimum $5.
  • Underpayment penalty: 5 percent of any balance not paid by the original due date, on top of any late filing penalty.
  • Fraudulent return: 50 percent of any underpayment.
  • Interest: simple interest accrues daily on unpaid tax from the due date until paid, at an annual rate set each January based on the federal rate established by the U.S. Secretary of the Treasury.

Tax preparers who fail to file by the required method face a separate penalty of 1 percent of the tax due, minimum $10 and maximum $500.14Pennsylvania General Assembly. Pennsylvania Code 72 PS 10 – Method of Filing That penalty falls on the preparer and stacks with any taxpayer-level penalties.

Filing electronically through myPATH by April 15, paying any balance by the same date, and keeping copies of the schedule and supporting records is the cleanest way to stay out of all of it.