It depends on the amount of deductible expense included in the patronage dividend, unless your received a qualified written notice of allocation as part of a patronage dividend.
If you received a qualified written notice of allocation, you need to report as income the amount specified in the notice.
If you didn't get a notice, the IRS says:
"Don’t report as income any patronage dividends you receive from expenditures that weren't deductible, such as buying personal or family items, capital assets, or depreciable property. You must reduce the cost or other basis of these items by the amount of such patronage dividends received." Publication 225
So, you need to figure out how much of the interest you paid last year was deducted as a business expense.
For example:
The amount in box 1 is $5,000.
Last year, you deducted $1,200 interest as a business expense for the use of the barn.
In this case $1,200 of the patronage dividend is taxable this year and the remaining $3,800 reduces the basis of the land.
The taxable portion of your patronage dividend is reported on Schedule F. Follow this link for more about how to report it in TurboTax.
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