If you’re a farmer or agricultural producer, you can deduct certain expenses you incurred to earn your income.
Make sure you keep records of all your farm business transactions to be able to support your expense claims.
You are required by law to keep receipts or other vouchers when you purchase something for your farm business.
Keep your records for at least six years after your last Notice of Assessment, which is as far back as the CRA will ask to see them in case you are audited.
If there’s no description on a receipt, like with a cash register tape, write a note describing the item you purchased on the receipt. If you don’t have receipts, the CRA could disallow your expense claims.
Featured Resource: Tax Preparation Toolkit for Farmers and Agricultural Producers
We’ve compiled a list of top tax deductions specific to farmers and agricultural producers that will help lower your tax bill.
Building repairs and maintenance
This includes repairs to fences and buildings used for farming (this excludes your farmhouse).
Clearing, levelling and draining land
You can deduct expenses associated with clearing trees, roots, stones and brush from your farmland, building an unpaved road and installing land drainage.
Containers and twine
You can deduct expenses for materials you bought to package, contain or ship farm produce or products.
You can deduct expenses for electricity related to your farm properties.
Feed, supplements, straw and bedding
You can deduct expenses for these items if they were purchased for your farming business.
Fertilizers and lime
If they were used for your farming business, you can deduct these expenses.
Gasoline, diesel fuel and oil for machinery
You can deduct these expenses if used for your farming machinery.
Heating fuel and curing fuel
You can deduct expenses related to heating farm buildings.
You can deduct insurance premiums you pay for insurance on farm buildings, qualifying farm equipment, livestock and business interruption.
Interest and bank charges
You can deduct interest you incurred on a loan utilized for your farming business or used to acquire property for your farming business.
You can’t deduct the principal of loan or mortgage payments, or any money borrowed for personal purposes.
Legal and accounting fees
Fees for accounting, bookkeeping, tax preparation and finances can be deducted, along with legal fees.
You can deduct expenses related to purchasing livestock.
This includes expenses related to upkeep of your machinery.
Motor vehicle expenses
There are expenses you can deduct if you use a motor vehicle for farming income. To claim this deduction, make sure you keep a record of your mileage throughout the year.
LEARN MORE: How to keep a mileage log for vehicle expenses.
This includes small items like pens, pencils, paper clips and stationary. You can’t claim calculators, filing cabinets, chairs and desks, which qualify as capital items.
You can deduct the cost of herbicides, insecticides, and fungicides used for your farming business.
This relates to property used in your farming business.
Repairs, licences and insurance (machinery)
You can deduct these costs as incurred for your machinery.
Rent (land, buildings and pasture)
If you rent the land for your farming business, you can expense the costs.
Salaries, wages and benefits
This refers to employees’ salaries and benefits.
Seeds and plants
This relates to seeds and plants used in your farming business.
If the tools cost less than $500, you can deduct their full cost.
Veterinary fees, medicine and breeding fees
You can deduct expenses related to medicine for your livestock, along with veterinary and breeding fees.
Free Guide: Tax Preparation Toolkit for Farmers and Agricultural Producers
We know you’re dreading it, but it’s got to be done – and with a little preparation, you can fulfill your tax obligations without any stress. Our simple, easy-to-understand toolkit will teach you how to get organized for tax season. Download your free tax preparation toolkit to learn what information and key documents you need to prepare so you’re ready for the tax filing deadline. There’s even a printable checklist that lists all the documents you’ll need as a farmer, and tax write offs you shouldn’t miss out on. Get the prep out of the way so you can get back to the field. Download your toolkit today.
Book a free consultation with FBC
Do you have questions about tax deductions? Are you worried about CRA filing requirements for your farming business? FBC works with Canadian farmers and agricultural producers to minimize their income taxes and maximize their assets.
We offer tax planning, preparation and audit representation as well as bookkeeping and financial planning to cover your complete financial needs, all available year-round for one fee.
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We're offering a no-cost, no-obligation consultation to explain how you can make sure you’re taking advantage of all the tax-saving opportunities available to you.
Disclaimer: The material above is provided for educational and informational purposes only. Always consult a tax professional like FBC regarding your specific tax situation.