Crop Insurance and Crop Disaster Payments - Agriculture Tax Tips
You must include in income any crop insurance proceeds you receive as the result of crop damage. You generally include them in the year you receive them. Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops because of drought, flood, or any other natural disaster.
Note: You can request income tax withholding from crop disaster payments you receive from the federal government. Use Form W-4V, Voluntary Withholding Request (PDF). Refer to How to Get Tax Help in Publication 225 for information about ordering the form.
You May Choose To Postpone Reporting Until The Following Year
If you use the cash method of accounting and receive crop insurance proceeds in the same tax year in which the crops are damaged, you can choose to postpone reporting the proceeds as income until the following tax year. You can make this choice if you can show you would have included income from the damaged crops in any tax year following the year the damage occurred.
How To Postpone Reporting Of Crop Insurance Proceeds
To choose to postpone reporting crop insurance proceeds received in the current year, report the amount you received on line 8a of Schedule F (PDF), but do not include it as a taxable amount on line 8b. Check the box on line 8c and attach a statement to your tax return. It must include your name and address and contain the following information:
- A statement that you are making a choice under IRC section 451(d) and Treasury Regulation section 1.451-6
- The specific crop or crops destroyed or damaged
- A statement that under your normal business practice you would have included income from the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged
- The cause of the destruction or damage and the date or dates it occurred
- The total payments you received from insurance carriers, itemized for each specific crop and the date you received each payment
- The name of each insurance carrier from whom you received payments
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.