Most income received pursuant to a production contract is subject to self-employment tax. The tax court, in a significant 1998 case, ruled that CRP payments received by an active farmer are not subject to self-employment tax. Federal gas tax credit. Farm owners, operators and tenants on the cash method of accounting can claim a credit against income tax for the federal excise tax paid on gasoline used on the farm or ranch and on diesel fuel, special motor fuels and aviation fuel used on a farm for farming purposes. Also deductible is the expense for the fuel.
Crop insurance proceeds.
Proceeds from insurance, such as from hail or fire coverage on growing crops, are included in gross income in the year actually or constructively received. Weather-related sales of livestock. Under another provision, if farm and ranch taxpayers on the cash method of accounting are forced because of weather-related conditions to dispose of livestock, they may be able to defer reporting the gain until the following taxable year. The taxpayer's principal business must be farming in order to take advantage of this provision. Livestock sold or destroyed because of disease.