As the agricultural carbon economy develops, there have been questions about how carbon credits will be treated as a line-item on a farm budget or balance sheet. Based on the practices you employ, you’ll be eligible for a set payment. That amount reflects the amount of carbon those practices sequester, as well as different production variables like fuel use, chemical applications and other input purchases. As it relates to taxes, carbon revenue will be counted as income, but will also count as a credit against production costs, making them a “cost reducer.” Ultimately, that means your cost of production will decline based on the per-bushel breakdown of the carbon your practices capture. For example, based on a 100,000-bushel corn crop with a previous production cost of $3.75/bushel, a $5,000 carbon credit income will take those production costs down to $3.70/bushel. See more on how it all breaks down.