Property Taxes and New Ontario Farmers

Based on the latest census data, more than 11% of Ontario land is devoted to fruits and vegetable crops, proving the notion that Ontario truly is the breadbasket of Canada and, in some respects, North America at large.

If you're an aspiring farmer or someone who's looking to move your operation to Ontario, welcome aboard.

But before you get started, there are a few things that are important to be aware of as it pertains to property taxes.

Ever since the Assessment Act was passed by the Canadian legislature in 1998, Ontario farmers have been able to take advantage of a lower property tax rate of 25%. However, in order to be eligible, there are a few prerequisites that need to be established.

Property Must Be Designated as Farmland

"Farmland must be deemed as such by the Municipal Property Assessment Corporation."

Growing fruits and vegetables may start with seeds and fertile soil, but before any of that can begin, farmland must be designated as such. The Municipal Property Assessment Corporation (MPAC) is the entity that assesses and values farmland.

Be sure to get in touch with the Ontario Ministry of Agriculture, Food and Rural Affairs to apply for the tax rate and schedule your property assessment.

Earnings Must Satisfy Threshold

Your bottom line, of course, is a top concern as a farm owner, and it's also something that the government needs to know about to be eligible for the 25% tax rate.

If your property generates a gross income of at least $7,000 per year, you'll be taxed at 25% of the municipal residential rate.

Your farm's annual income can provide you with tax benefits.Your farm's annual income can provide you with tax benefits.

What qualifies as farm income? Things like soil tilling, fruit growing, beekeeping, dairy production, chicken hatcheries and Christmas tree farms all fall under farm income classification.

But there are some that are affiliated with farming that are classified separately. For example, if you also sell baked goods and the ingredients come from your garden, this is not considered farm income.

Make sure you talk with an FBC tax professional for other examples in which farm income may not apply.

Owners Must be Canadian Citizens

It's up to the farmer whether they want to establish their business as a sole-proprietorship, partnership or corporation, but however it's done, the owner must be a Canadian citizen or permanent resident. For partnerships, more than 50% of the profit or loss must be for people whose residence and business is within the Canadian border.

Exceptions May Apply

As with just about every rule in life, there are some exceptions that can enable you to still qualify for the 25% property tax rate.

For example, because the weather is fickle and doesn't always cooperate - such as excessive rainfall or too little precipitation - you may have a year in which your earnings are below what you normally make. So long as you can establish that your revenues are usually north of $7,000, then the tax rate should still apply.

For more information on exceptions and other farm tax-related issues, speak with an FBC tax specialist.

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