The government took part of our land for road widening and we received a payment. Do we have to report this as income?

Yes. In tax parlance, the payment for the condemnation of your property is the result of an involuntary conversion and it is taxable. Fortunately, you can treat the payment as a capital gain (to the extent the payment exceeds your basis in the portion of your property that was condemned). You may be able to defer recognizing the gain now. Different rules apply to a personal residence versus business or investment property.