3 Tax Incentives for Farmers | FBC, Canada's Farm & Small Business Tax Specialist

3 Tax Incentives for Farmers

Canada's farmers work hard to produce fresh food, and they are helped by a number of government incentives aimed at assisting them with saving money on their taxes.

The Canadian government has a number of programs in place to assist farmers including AgriStability, AgriInvest and other risk management systems that serve as safeguards against income drops for farmers.

In addition, there are tax deductions and other incentives that farmers can take advantage of in order to ensure their business is as cost-effective as possible.

As long as you're a full-time farmer - which means operating a farm as a business with the expectation of making a profit - then you're able to take advantage of these credits and deductions. Full-time farmers also have no limit on the amount of losses that are deductible.

For more information on the ways that farmers can save money, check out the following FBC tax tips:

1. Not Just A Farm, A Business

Farming is a business, so farmers can take advantage of the same tax breaks as small businesses.

Farmers are allowed to deduct all of the usual expenses from their income. Because farming is specialized, there are a number of purchases farmers can deduct that other businesses can't.

For example, deductions can be claimed on these expenses:

  • Cost of fertilizer
  • Veterinary, medicine and breeding fees
  • Portion of crop insurance program premiums

2. Charity Pays Off For Farmers In Ontario

A tax credit for Ontario farmers who donate food to food banks was recently introduced, Real Agriculture noted.

The tax update was announced last fall by Jeff Leal, Ontario's agriculture minister, and included in the Local Food Act.

The "Food Donation Tax Credit for Farmers" will provide individuals who donate to food banks or student nutrition programs with a tax credit valued at 25% of the fair market value of the items they provide to community food programs.

Farmers can claim donations going as far back as Jan 1, 2014. The products that farmers can donate include fruits and vegetables, dairy and eggs, grains and meat, nuts and mushrooms.

This is the first tax credit of its kind in Canada.

3. Taking Advantage Of Capital Gains

Taxpayers are eligible for $800,000 of capital gains tax-free on farm properties that qualify during their lifetime.

Qualifying property can mean a number of things, including shares in a family farm corporation or interest in a family farm partnership, and quotas used in a farming business and real property.

In addition, farmers can transfer ownership of their assets to their spouses at a cost.

This means that there will be no capital gains realized until the spouse sells the property. And it isn't just farmers' spouses who can take advantage of this.

Ownership of capital property utilized in the farming business can also be transferred to children anywhere between cost and fair market value .

Farmers have found a number of ways to take advantage of tax credits provided by the government.

In addition, many farmers will structure their business as a corporation in order to utilize the beneficial tax and succession standards that come with incorporation .

Farmers who would like to learn more about the incentives available to them should speak with a farm tax expert at FBC

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