Water Conservation Rebate

[HD5]

Good afternoon,

I received a Water conservation rebate (1099-Misc) and I did include the 1099-misc as income and then make a negative adjustment to remove it. My questions are:

1- Do I have to enter the Rebate amount again on the State Taxes?

2- Since I have rental income, can I deduct the expenses from the rental income?  ( I use the rebate money to hire a contractor to do the landscaping and spend more than rebate money).

Please advise. Thanks.