Prior to 2018, the farming loss of a taxpayer, other than a C corporation, is limited for any tax year in which any applicable subsidies are received. The losses are limited to the greater of (a) $300,000 ($150,000 for a married person filing separately), or (b) the taxpayer's total net farm income for the prior five tax years.

Applicable subsidies are (1) any direct or counter-cyclical payments under title I of the Food, Conservation, and Energy Act of 2008 (or any payment elected in lieu of any such payment), or (2) any Commodity Credit Corporation (CCC) loan.

Total net farm income is an aggregation of all income and loss from farming businesses for the prior five tax years. Any loss that is disallowed under this rule in a particular year is carried forward to the next tax year and treated as a deduction attributable to farming businesses in that year. Farming losses arising because of fire, storm, or other casualty, or by reason of disease or drought, are disregarded for purposes of calculating the limitation. (Code Sec. 461(j), as amended by the Heartland, Habitat, Harvest, and Horticulture Act of 2008, § 15351)

2017 through 2025 - Under TCJA the IRC Sec 461(j) limitation on “excess farm loss” for non-corporate taxpayers no longer applies after 2017 and through 2025, although an excess farm loss from 2017 will carry over to 2018. For 2018-2025 all non-corporate taxpayers’ business loss deductions are limited to a threshold amount (IRC Sec. 461(l) as modified by TCJA Sec. 11012(a)).

However, the CARES Act includes a provision that retroactively turns off the excess active business loss limitation rule implemented by TCJA by amending the provision to apply to tax years beginning after December 31, 2020 (rather than December 31, 2017). It also turns off active farming loss rules for tax years beginning after December 31, 2017, and before December 31, 2020.