These days, the pull to live a more rural life can be a strong one. Establishing your own escape to a quieter time and place offers great appeal for those who crave a simpler life. One great way to pursue your dreams of large-acre land is with a hobby farm. Pleasure farming can provide self-sufficiency, lifestyle enrichment and sustainability. But how do you start a hobby farm, and what does “hobby farm” even mean?
Those of us at Hayden Outdoors are deeply rooted in the country’s farming and ranching communities and lifestyle, and we’re happy to help clients find their ideal plot of ground to start their dream hobby farm. Here are good first steps and important considerations from the farmland experts at Hayden Outdoors.
Table Of Contents
Hobby Farm Definition – What Is It And How Is It Different From A Business Farm?
There’s no standard meaning or definition of what a hobby farm is, but generally, hobby farms are smaller than a commercial farm, and are operated for pleasure, recreation or supplemental income instead of as a full-time business.
You and your family or friends are typically the managers of a hobby farm, and while the farm might produce crops, livestock, orchards or gardens that supply you with a fresh bounty, people who own hobby farms do not typically rely on them as their main source of income.
How Big Does A Plot Of Land Have To Be To Qualify As A Hobby Farm?
Again, there’s no hard-and-fast rule here. If you’re looking for a good amount of land that will allow you to establish your own hobby farm without becoming overwhelmed, 10 acres is a good place to start.
However, more than 10 acres can also provide additional opportunities when starting your hobby farm, such as recreation, more room for cattle or timber harvesting, depending on your location and local regulations.
Hobby Farm vs Homestead – What’s The Difference In Meaning?
The idea of homesteading is derived from the earliest days of settlement in the West. The federal Homestead Act of 1862, signed by President Abraham Lincoln, established an area of public land—typically 160 acres—granted to any U.S. citizen willing to settle on and farm or otherwise improve upon the land for at least five years.
Today, that homestead definition is a little looser, often referring more to a large-acre plot of land established with the intent of self-reliance and sustainability. This might mean growing one’s own food, raising animals, harvesting crops or other produce and generating energy such as solar or wind to help sustain an independent lifestyle.
A homestead is not usually intended as an income-generating property, although some recreational property owners do turn to outfitters, guides and recreational opportunities to help offset ownership and property maintenance costs.
Definitionally, a hobby farm is typically less about self-reliance and more about fun and lifestyle enrichment, allowing owners to pursue passion projects like raising a small number of animals, beekeeping, maintaining orchards or harvesting specialty crops. Owners do not usually rely on a hobby farm as their sole source of income.
What You Need To Know About Hobby Farm Tax Deductions
This last point—you, as the owner, not relying on a hobby farm as your sole source of income—is an important defining factor between a hobby farm and a farm utilized with the intent of turning a profit.
According to Utah State University, “In general, the IRS considers an activity a trade or business, and not a hobby, if it is conducted with a profit motive. Profit is defined as income (receipts) greater than expenses, where expenses include depreciation of capital assets. Note that this determination does not require that a profit is generated, only that there is motive for profit in conducting the activity. The distinction between a hobby and a trade or business is important because it determines the deductibility of expenses related to the activity.”
Farms that are treated as a business can deduct all ordinary and necessary expenses, even if they exceed the farm’s income. This can create a net operating loss to offset other income. By definition, hobby farms do not enjoy the same protections.
Internal Revenue Code § 183 codifies the “hobby loss” rules, stating, “if an activity is deemed to be a hobby, (i.e. not engaged in for profit), deductions for expenses are limited.” Also, “The burden is on the tax payer to prove the activity is carried out with a genuine profit motive.”
Some of the most important factors the IRS and the courts look at to determine if a farming activity is a for-profit business (and therefore eligible for full deductions) or a hobby (limited deductions) include:
- Manner of operation / businesslike behavior – In short, does the farmer utilize traditional business practices such as keeping books and records, having a business plan, utilizing a separate bank account and making improvements to the property to help improve profitability?
- Expertise of the farmers and advisors
- Time and effort – This includes how much personal time you and your family devote to your farm, especially if the amount of time suggests you’re looking to turn a profit rather than simply pursue recreational farming.
- Appreciation of assets – This one is a little tricky given that most of us buy property with the hope it will appreciate over time. However, in the form of a hobby farm, this typically doesn’t include large equipment, outbuildings or other major infrastructure that can support a profit motive.
- History of income or losses – If you don’t claim a profit over a number of years, the IRS will assume you’re not in the farm business to generate one.
- Your financial status – When you file your taxes, the IRS will look to see if you’re relying on income from your farm for your livelihood (business) or if the farming activity is subsidized by other means (hobby).
- Personal pleasure or recreation – While many farmers enjoy their work, there is a difference between someone who farms for money and others who do it for fun or personal enjoyment.
- Changing methods or improving equipment over time – Those who upgrade equipment or improve the property over time in ways that contribute to profit are viewed as commercial farmers.
- Success in similar activities – If you’ve shown success in prior farming business ventures, the IRS will most likely determine your current endeavors are intended for profit, not hobby.
Here are a few quick-and-dirty rules farmers and hobby farmers turn to to help determine how they should classify their land and the business on it, as well as what they can and can not deduct from their taxes:
The 3-of-5 years rule: If your farmland activities show a net profit in at least three of five tax years, the IRS will most likely presume you are running a business.
According to the IRS, hobby farms:
- Must report all income from farming activity on your tax return.
- Most expenses do not qualify for deduction—you cannot deduct losses that exceed the hobby income. Under the Tax Cuts and Jobs Act of 2017, miscellaneous itemized deductions, including hobby expenses, were largely eliminated. So, in most current cases, hobby farmers cannot deduct expenses at all.
For a comprehensive guide, the IRS provides Publication 225 (2024), Farmer’s Tax Guide. If you have specific questions about the tax implications of starting and owning a hobby farm, it’s important to talk to a recreational real estate professional and your accountant before you purchase the land to ensure you avoid any negative or unwanted tax implications.
The Pros And Cons Of Starting A Hobby Farm
If you dream of days in the dirt, exploring new ways to garden, farm, own chickens or experience the pure joy that piglets bring to the world, choosing to start a hobby farm might just be perfect for you. So let’s start with the pros of starting a hobby farm:
- Lifestyle and enjoyment – Hobby farming lets you connect with nature and experience a more rural setting. It can also be a gateway to lifelong passions such as gardening, raising farm animals or specialty crops. And then there’s the added benefit of stress relief.
- Self-sufficiency – Whether or not you pay attention to the current price of eggs, there’s something incredibly satisfying (and probably a lot more flavorful) about producing your own food.
- Supplemental income – As mentioned, hobby farms can’t be your sole source of income, but they can supplement it with weekly farmers’ markets, local produce stores and art fairs.
- Healthy families and communities – Your hobby farm can be an excellent way to engage with your family and local community members and teach children responsibility and focus on sustainable living.
- Environment and personal health – And then, of course, there’s the environmental and health benefits of hobby farming. Growing your own produce, knowing what goes into the soil and stocking your family’s dinner table with wholesome, homegrown goods is a great way to stay on top of your health.
But hobby farming does come with important considerations, costs and cons, including:
- Time – This is the big one. Even though it’s not your primary income source—or perhaps, because it isn’t—it’s critical to consider the time commitment of starting and owning a hobby farm. It’s a year-long endeavor and one that requires daily attention. Plants and animals don’t allow for much lifestyle flexibility; they need attention regardless of weather, holidays or time off.
- Financial costs – There are a variety of costs to think about when starting your own hobby farm, including the cost of the land itself, fencing, equipment, animal feed, livestock (if you intend to have some) and out buildings. There are also ongoing costs, such as maintenance, repairs and vet bills. And while hobby farms can be a great area of focus as you age into retirement, keep in mind that, by definition, they cannot be considered your sole source of income.
- Legal and tax limitations – As outlined above, hobby farms don’t come with many tax perks. Additionally, you’ll want to think about zoning laws, permits and property taxes.
- Physical demands – It’s part of the apparel and part of the reality: hobby farming requires a lot of physical engagement. Make sure you’re up to the task before you purchase the land.
- Unpredictability – If you’re not concerned about consistency, this might not matter. However, hobby farms are subject to weather conditions, pests, disease and market fluctuations.
How To Know If You Should Start A Hobby Farm
If, after considering all of the pros and cons of starting a hobby farm, you’re still game to give it a go, here’s a final checklist of things to think about before you do.
And if you’re still not sure, talk with your farmland real estate agent to get a better idea of what’s involved, walk some plots of land and learn more about the realities of hobby farming. If it all adds up, you’re probably a great candidate.
You might be ready to start your own hobby farm if:
- You’re drawn to rural living and you value lifestyle over profit.
- You have the time, and you want to spend it working the land, feeding the animals and weeding the garden.
- You have the financial stability required to allow hobby farming to be an enjoyable experience, and not a stressful one.
- You like getting your hands dirty.
- You crave self-sufficiency and farm-fresh food.
- You’re a student of life and willing to learn, research, experiment and make some mistakes along the way.
How To Start A Hobby Farm – Complete Step-By-Step Guide
The time is now and you’ve found the perfect plot of farmland. Here are your next steps to start a hobby farm:
1. Establish Your Goals For Starting A Hobby Farm
- Growing your own food
- Enjoyment and lifestyle
- Generating a little supplement income
- Building your dream farmhouse
2. Begin The Research Process
If you’re new to the game, learn the basics of farming, gardening, livestock care, soil management and what’s required to raise farm animals. Books, YouTube videos and local resources are a great place to start when getting into hobby farming. Don’t be afraid to ask local farmers at the weekly market how they got started.
3. Choose The Right Property To Start Your Hobby Farm On
Finding the right swath of ground for your hobby farm is key. Considerations include:
- Size
- Zoning laws
- Soil quality and water access and availability
- Accessibility
Here at Hayden Outdoors, helping your find the dream plot of land to start your hobby farm is our specialty. We’ve created a curated list of properties to get you started on your agricultural journey.
Find Your Dream Hobby Farm
4. Plan What You Want To Start Growing On Your Hobby Farm
- Crops can include vegetables, herbs, fruit trees and specialty crops.
- If your time and the farmland permit, livestock and farm animals are something else to consider, including chickens, goats, sheep, bees, rabbits or cows.
- Pursue passion projects, like beekeeping, cultivating mushrooms, cut flowers or agritourism.
5. Create A Farm Plan
- Layout fields, gardens, barns, fencing, water systems and outbuildings.
- Determine your budget and start-up costs.
- Set a timeline for planting.
6. Start Small And Grow From There
When you start your hobby farm, you’ll want to begin with a few animals, a small plot of crops and a manageable garden. Keep your operations sized to what you can realistically manage and maintain over time.
7. Stay On Top Of Finances And Legal Aspects
- Keep detailed farm financials.
- Consider farm insurance.
- Talk to your local CPA about how best to keep track of expenses, income and deductions.
8. Create Daily Routines And Stick To Them
- Establish consistent feeding, watering and care schedules.
- Track your planting and harvesting cycles.
- Keep detailed vet records for all animals on your hobby farm.
9. Scale Up Your Hobby Farm Operations
As you learn, consider how you want to grow your hobby farm. What else would you like to produce? Are there new opportunities for local sales or artisan outlets?
Equipment And Essentials – What Is Needed To Start A Hobby Farm?
Here’s a comprehensive list of the farm equipment and essentials you’ll need to start a hobby farm, although specifics will vary depending on your overall objectives, goals and timeline.
Basic Tools For Planing, Harvesting, And Farm Chores
- Shovels, garden forks, spades
- Hoes, rakes, trowels
- Wheelbarrow
- Pruners, clippers, shears, saws
- Gloves, boots, eye protection
Soil And Garden Supplies
- Seeds, seedlings and starters
- Compost and any fertilizer you plan to use
- An irrigation system, including hoses, sprinklers, drip lines, water catch containers and/or rain barrels
- Raised beds, planting rows, greenhouse
Livestock And Farm Animal Infrastructure
- Fencing (can be electric, woven or wood depending on animals)
- Animal housing, such as chicken coop, goat shed, barn, rabbit hutches or round pen
- Feed and water systems like troughs, feeders, heat lamps
- Bedding
- Veterinary supplies
Farm Equipment
This will depend on what kind of hobby farming you plan on doing, but can include a push mower, weed trimmer, ATV, trailer, plow, cultivator and manure spreader. Consider renting larger equipment or buying it at auction if you’re just starting out.
Storage And Structures
- Shed or barn
- Root cellar
- Work benches
- Compost bins or piles
Safety And Maintenance
- First-aid kit for both humans and animals
- Fire extinguisher
- Protective clothing
- Maintenance supplies (e.g. sharpeners, oil, replacement parts)
The Search For The Perfect Hobby Farm Land Starts Here
Ask those of us at Hayden Outdoors and we’ll tell you, it’s always a good time to spend more time on the land, and choosing to start a hobby farm is a great way to do it. Our recreational real estate professionals—many of whom grew up cultivating, tilling and harvesting themselves—are ready to help you find your personal dream farm, so you can start living off the land.
Or if you’d like to do a little online exploring before talking to an agent, these properties are all 100 acres or less, perfect for getting your feet wet and your hands dirty when it comes to establishing your own hobby farm.
Find Your Dream Hobby Farm
866-741-8323
Login
Back to Blog