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Nowadays, many Americans enjoy their morning eggs, hash browns, and orange juice without thinking about where all that good food came from. But all across the country, a small number of farmers are still working hard to meet the always-hungry demand of the U.S. population. According to the EPA, there are about 2.2 million farms in the United States. The farmers who operate these ranches, orchards, and more have to pay taxes just like the rest of us, though with slightly different rules. If you’re one of the 1% of the U.S. population still operating a farm, these pointers will ensure you’re ready to grab the tax bull by its horns when filing season comes around again.

When it rains, it pours. If you receive insurance payments for crop damage this year, you should report these payments as income on your 2015 tax return. You also must report the sale of items or livestock that you buy for resale, taking into account the difference between your selling price and your basis in the item. However, if you end up having to sell more livestock than usual due to bad weather, you might be able to hold off reporting your gain from the unexpected sale of these additional animals.

Deductions are always nice, though the reason for them often isn’t as great. If you took out a loan and paid interest on it, you can only deduct that interest if the loan was used specifically for farming purposes. You can also deduct wages you pay to farm employees, both full and part-time workers, and you must withhold Social Security, Medicare and income taxes from their wages. Finally, you’re allowed to deduct any “ordinary and necessary expenses” that you pay to keep your farm alive and kicking.

Once all is said and done, and you’ve added up your totals, you might find that expenses are more than your income for the year. In that case, you may have a net operating loss. While the bad news is that, well, you have a net operating loss, the good news is that you can get something of a tax break in this situation. After all, the IRS isn’t trying to milk you for all you’re worth. You might be able to carry the loss over to other years and deduct it, get a partial or full income tax refund for prior years, and lower your tax down the road.

Hopefully the former situation doesn’t happen to you, and you end up having a great year with fields of gold. Then, you can lighten your tax burden by averaging some or all of your current year’s farm income over the past three years. This is especially helpful if income was down in one or more of those previous three years. Also, don’t forget about those excise taxes you paid on fuel to keep your farm up and running – you might be able to claim a tax credit or refund for them.

All farm income should be reported on the aptly-named Schedule F, Profit or Loss from Farming. But before you start counting your chickens before they hatch, you should also read through Publication 225, Farmer’s Tax Guide for an even better understanding of how federal tax laws apply to farming.

And get ready to head abroad for the final blog in the Tax Pointers series: Reporting Foreign Income…