A dial rather than a switch: it taxes part of this year's farm or fishing profit at the rates of the three prior years, and you elect how much. It moves income tax only — self-employment tax is figured on Schedule SE and does not change.
Who can use it, and who cannot
Schedule J is open to two trades. The instructions define a farming business as "the trade or business of cultivating land or raising or harvesting any agricultural or horticultural commodity." That includes a nursery or sod farm, orchards, raising and caring for animals, and leasing land to a farming tenant when the rent is a share of the crop set in writing in advance.
A fishing business is fishing where the catch is intended to enter commerce, including support operations at sea, leasing a vessel for a share of the catch, and crew work paid by a share of the catch.
Two kinds of work sound like farming and are not:
- Contract harvesting. "Contract harvesting of an agricultural or horticultural commodity grown or raised by someone else" is excluded. A custom harvester's income from other people's fields cannot be averaged.
- Trading. "Merely buying or reselling plants or animals grown or raised by someone else" is excluded too.
You do not need to have farmed or fished in the earlier years: "you aren't required to have been in the business of farming or fishing during any of the base years."
What goes into elected farm income
Elected farm income starts from your taxable income from farming or fishing, which the instructions define as "all income, gains, losses, and deductions attributable to your farming or fishing business." If you do both, you combine them. The pieces come from several forms, among them Schedule F, Schedule C, Schedule D, Form 4797 and Form 4835, less the part of the deductible self-employment tax that belongs to the business.
Two edges matter most:
- Included: gain or loss on property "regularly used in your farming or fishing business for a substantial period of time," such as machinery or breeding stock. If the business has stopped, the sale counts when it happens within a reasonable time, and within one year is presumed reasonable.
- Excluded: land, and development rights, grazing rights and similar rights.
From that total you choose how much to average. The instructions: "It may be to your advantage to include less than the entire amount." Your elected farm income can't exceed your taxable income. You choose how much farm income to average explains why the maximum is rarely the best number.
How the lines work
On the 2025 form the base years are 2022, 2023 and 2024.
| Line | What it does |
|---|---|
| 1 | Your taxable income for the year, from Form 1040, line 15 |
| 2a | Elected farm income, the amount you choose |
| 2b–2c | The part of line 2a that is net capital gain, and unrecaptured section 1250 gain |
| 3–4 | The rest of this year's income, taxed at this year's rates |
| 6 | One third of line 2a |
| 5–8 | The first base year's taxable income plus that third, taxed at that year's rates |
| 9–12 | The same for the second base year |
| 13–16 | The same for the third base year |
| 19–21 | The tax you actually paid for each base year |
| 23 | Lines 4, 8, 12 and 16, less lines 19 to 21: your tax, carried to Form 1040, line 16 |
In plain terms: this year's tax becomes the tax on the income you did not elect, plus whatever the extra third would have added to each base year's tax. Elect $90,000 and $30,000 is added to each of the three years.
A base year with taxable income below zero is not simply treated as zero. When a base year's taxable income is zero or less, the instructions send you to a worksheet that works out how far below zero it was, leaving out any loss that was carried to another year, and has you enter the result "as a negative amount." A poor year can absorb part of its third before any tax is charged on it.
Keep the chain
Using Schedule J changes where next year's base figures come from. Once you have used it, lines 5, 9 and 13 take their amounts from your earlier Schedule J rather than from the returns you filed. The instructions ask you to keep a copy of your 2025 return "to use for income averaging in 2026, 2027, or 2028," and to keep the oldest base year's records "for at least 3 years after April 15, 2026 (or the date you file your 2025 tax return, if later)."
What it does not change
- Self-employment tax. Schedule J computes income tax. Schedule SE still runs on your full net earnings.
- Alternative minimum tax. "This election doesn't apply when figuring your alternative minimum tax on Form 6251."
- A child's tax. You don't have to refigure the tax of a minor child who had to use your rates in the prior years.
- Your income. The year's income is what it was. Only the rates applied to the elected part change.
Everything on this site that lands here
Each article declares the sheet its number ends up on, so this list is the writing itself rather than a summary of it.
| Read | Where it lands |
|---|---|
| You choose how much farm income to average | drawing on the Schedule F profit |
Common questions
I lease my land for a share of the crop. Can I average that income?
I am a deckhand paid a share of the catch. Does Schedule J apply to me?
Can I include the gain from selling farmland?
I used Schedule J last year. Do I start again from my old returns?
Do I have to attach Schedule J if I have farm income?
The official page
Everything here is written from the IRS's own material, and the place to check it is Schedule J on irs.gov. Figures and rules change; the source is what settles them.
- IRS: 2025 Instructions for Schedule J (Form 1040)
- IRS: Schedule J (Form 1040), Income Averaging for Individuals With Income From Farming or Fishing, 2025
- IRS Publication 225 (2025), Farmer's Tax Guide
This is educational material, not tax advice. Your own situation may turn on facts this page does not know about.