The 66.66% Rule
Why It Exists — and Why OBBBA Finally Fixes Part of It
If you have ever tried to qualify for increased farm program payment limits and found yourself tripped up by equipment trade-in gains, you have run headfirst into what we call the 66.66% rule. It has frustrated farmers and their advisors for years. The good news is that the One Big Beautiful Bill Act (OBBBA) has now changed the game — at least for equipment gains going forward. Let’s walk through how we got here and what is actually different now.
Why the 66.66% Rule Exists
To qualify for higher commodity program payment limits, a farmer must demonstrate that their farm adjusted gross income (AGI) is greater than 75% of their total AGI. Simple enough on its face. The problem is that not all income that feels like farm income is automatically treated as farm income for AGI purposes.
USDA drew a hard line on three specific categories: gains from selling or trading farm equipment, income from custom farming and harvesting services, and income from the sale of farm inputs (think seed, fertilizer, or chemicals sold to other farmers as a sideline). For each of these, the rules require a threshold test before the income counts as farm income at all.
Specifically, your farm AGI — without including those gains — must already exceed 66.66% of your total AGI before you are allowed to fold the equipment gains, custom farming income, or farm input sales back into the farm AGI calculation. If you cannot clear that hurdle on your other farm income alone, those amounts simply do not count as farm income for the payment limit test.
The Actual Rule
The 66.66% threshold did not appear in the Farm Bill statute itself — it lives in the Code of Federal Regulations, specifically at 7 CFR § 760.2002, which defines “income derived from farming, ranching and forestry operations” for disaster program purposes. The same framework was applied across FSA farm programs. Here is the key language, as codified:
