If their farm operations have been unprofitable for a certain period and are not managed to allow a profit, farm deductions are limited to gross farm income. You may file some of the forms that farmers file. Most people will choose the cash method of accounting whereby farm inventories do not have to be recorded. Most expenses are deducted in the tax year they are paid. Schedule F is used for sales of farm products and other farm income as well as farm expenses.
Material participation is significant participation in producing crops or livestock.
It usually involves paying self-employment tax on the net earnings. A good set of records will help you organize your farm income and expenses. Your ISU Extension office has an inexpensive farm record book that should be adequate for a small farm, hobby farm, or a farm that is rented to others. Reviewing a Schedule F will give you an idea of incomes and expenses related to farming. Don't forget items that must be depreciated, especially if they have been acquired this tax year.