1244.Combining Farm and Non-Farm Net Earnings

1244.1What options are available if both farm and non-farm self-employment are involved?

If both farm and non-farm self-employment is involved, both options (farm and non-farm) may be available. If you choose to use both options, the farm option (see §1235) is computed without regard to non-farm self-employment. However, the non-farm option (see §1242) requires consideration of farm self-employment to establish eligibility for its use.

1244.2How are the options applied to determine net earnings?

The options are applied separately to the gross income from each activity to determine the reportable net earnings from each activity. However, if you are engaged in both activities during a taxable year beginning after 1972, you must combine net earnings or loss (either actual net earnings or earnings as computed under the farm and/or the non-farm optional methods) from both activities. Reporting the total net amount permits the use of several alternatives:

  1. Report the actual net earnings from either activity with the optional net earnings from the other activity;

  2. Report the actual net earnings from both activities; or

  3. If otherwise eligible, use the option in computing net earnings from both activities.

1244.3What is the maximum allowable total for combined net earnings?

If you elect to use both the farm option and the non-farm option in any one taxable year, the maximum combined total amount of your net earnings from self-employment cannot exceed $1,600.