A Smarter Safety Net: What the New USDA Payment Rules Mean for Your Farm

Effective with the 2026 crop year, USDA has updated payment limitations and eligibility rules. This change modernizes how benefits are calculated and who qualifies, providing more flexibility for today’s farm operations.

What’s Changing?

Historically, LLCs and S-Corporations were treated as a single entity, limited to one payment cap, regardless of how many owners were involved. Under the new rule:

• These entities are now treated as qualified pass-through structures, along with partnerships and joint ventures.
• Payment eligibility is now tied to individual contributions, not the entity. The $900,000 “Average AGI test” and payment limits are now tested at the owner level. For the 2026 crop year, the 2022, 2023 and 2024 years are the test years.
• The “actively engaged” rules have been clarified. Wages and guaranteed payments no longer automatically disqualify a member from being actively engaged.
• Payment limits are increased. Each owner, if qualified, may receive a payment. Provisions for annual inflation adjustments are included.
• Producers that exceed the $900,000 AGI Limitation may still qualify for CERTAIN disaster and conservation programs if 75% of their Average Gross Income is from farming, ranching or silviculture. For this purpose, the definition of farming, ranching and silviculture now includes agritourism, direct-to-consumer marketing of agricultural products, and the sale or trade-in of agricultural equipment.
• Every entity will need a new Form 902E filed by September 15, 2026. As of this writing, there is no grandfathering or any exceptions. The new Form 902E asks questions the old one never did. It is advised that every entity review their old Form 902E, confirm your entity’s tax classification, line up your owner information, and get the new Form completed as soon as possible.

How these changes could impact your operation

• Core programs like ARC/PLC now carry a base limit of $155,000 per person, per year.
• A multi-owner operation may access multiple limits, one per qualified owner.
• You can structure for liability protection without automatically limiting program access.
• It may be time to reassess ownership/entity structure to maximize these benefits, if doing so is in alignment with overall goals.
• Tax planning becomes more critical than ever.

Next Steps

To benefit from these changes, proactive review is critical:

1. Reassess your structure: Align ownership with how the farm operates today.
2. Validate active engagement: Eligibility still depends on real contributions, such as labor, management and capital.
3. Meet the deadline: Update operating plans with FSA by September 15, 2026.
4. Coordinate advisors: Align with tax, financial and crop insurance teams before making changes.
5. Tax plan with these limitations in mind: The $900k Average AGI limitation and the 75% Average Gross Income from farming, ranching and silviculture tests are very different. While the 75% Average Gross Income test may be more difficult to meet – proactive steps are the key to maximization. A running schedule of Average AGI and Average Gross Income should be kept current to avoid any surprises.   

Farm Credit East's perspective

At Farm Credit East, we’re focused on helping you translate policy into action so your operation is not just compliant but better positioned for what’s next.

Contact Us Today!