USDA Cost Share payments… are reported as Agricultural
Payments on your schedule F and are taxable income.
I've attached a link to the IRS schedule F instructions for
you to review. Please see page F-4, Lines 4a and 4b;
https://www.irs.gov/pub/irs-pdf/i1040sf.pdf
Cost-Sharing Exclusion (Improvements)
You can exclude from your income part or all of a payment
you receive under certain federal or state costsharing conservation,
reclamation, and restoration programs. A payment is any economic benefit you
get as a result of an improvement. However, this exclusion applies only to that
part of a payment that meets all three of the following tests.
1. It was for a capital expense. You can't
exclude any part of a payment for an expense you can deduct in the year you pay
or incur it. You must include the payment for a deductible expense in income,
and you can take any offsetting deduction. See chapter 5 for information on
deducting soil and water conservation expenses.
2. It doesn't substantially increase your annual income from
the property for which it is made. An increase in annual income is substantial
if it is more than the greater of the following amounts.
a. 10% of the average annual income derived from the
affected property before receiving the improvement.
b. $2.50 times the number of affected acres.
3. The Secretary of Agriculture certified that the payment was primarily made
for conserving soil and water resources, protecting or restoring the
environment, improving forests, or providing a habitat for wildlife.
