Ordinary and necessary business expenses related to farming generally are deductible. The timing of the deduction is determined by your method of accounting (cash or accrual). However, in addition to the types of expenses claimed by non-farm businesses, farmers may be able to claim deductions for expenses unique to farming activities and in ways more favorable than general tax rules would allow.
Prepaid Farm Supplies
If you are on the cash method of accounting, expenses generally are deductible when paid. However, if you prepay farm supplies, they must be deducted ratably over the period during which they will be used unless you qualify for an exception to this prepayment rule.
Prepaid farm supplies include:
Prepaid farm expenses are deductible to the extent they do not exceed 50% of other deductible farm expenses in the year (including depreciation and amortization). Any prepaid expenses in excess of this limit are deductible in the following year.