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How do you determine if a 1099 G payment from the USDA for an approved Environmental Quality Improvement Program is taxable?

 
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KrisD
Intuit Alumni

How do you determine if a 1099 G payment from the USDA for an approved Environmental Quality Improvement Program is taxable?

 

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.

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1 Reply
KrisD
Intuit Alumni

How do you determine if a 1099 G payment from the USDA for an approved Environmental Quality Improvement Program is taxable?

 

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.

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