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Do I need to claim my farmland preservation tax credit as income?
Yes, the farmland preservation tax credit is taxable income in the year it was received. According to IRS Publication 225, agricultural program payments including those for approved conservation practices are to be included in income. The farmland preservation tax credit meets all of the requirements for being taxable income on the federal return. Therefore, it must be included in your adjusted gross income, total household resources, and household income.
If you own property as an individual but the farming activity is operated under a partnership, S-Corp or LLC, report the farmland preservation tax credit as income on your personal return. Please do not include it on your U.S. 1065 or U.S. 1120S.