Government tax incentives for agriculture businesses

If you earn an income from farming activities your business may qualify for federal or provincial government incentives that can cut your tax bill. 

If you earn an income from farming activities your business may qualify for federal or provincial government incentives that can cut your tax bill.

Read on to learn more about how you can save on taxes this year in your farm or agri-business.

Federal tax deductions

Take advantage of tax deductions and strategies that benefit farmers.

  • Intergenerational tax deferrals: Farmers can choose to defer all or part of income tax upon the transfer or sale of farm property to a child, grandchild or great-grandchild. Proceeds of disposition may be any amount between the property’s tax cost and its fair market value.
  • Deductible losses: Whether or not farming is your main source of income, your business may qualify for a farm loss. If your primary income is not farming related, you may be eligible to claim only a portion of the loss against your main income source.
  • Capital cost allowance: If you acquire depreciable property for your farming business, you can deduct the cost over a period of several years. Examples include machinery, equipment, a building or furniture.
  • Capital gains deduction: Farm property may qualify for this deduction upon transfer or sale if it is:
    • A building used to operate a farm business;
    • A share of the capital stock of a family farm corporation;
    • An interest in a family farm partnership; or
    • A qualified capital property used to operate a farm business.
  • Capital expenditures: The owner of a farming business may buy assets that provide a lasting economic benefit to the farm, such as milk and egg quotas or licences.

Income splitting as a tax strategy

Under a corporation, you can compensate your spouse or children for their contributions to operating the family farm while reducing the tax you pay. You’ll reduce your income tax payable at the higher personal tax rate by dividing it among your family’s salaries.

Scientific research for farms

It’s a fairly common practice for farmers to fund agricultural research through a third-party payment mechanism, such as check-offs or levies administered by producer organizations. The Scientific Research and Experimental Development Tax Credit (SR&ED) applies to the cost of agricultural research funded by a farmer and administered through a third-party producer organization.  These producer organizations act as agents through which member farmers can finance eligible research investments.  The SR&ED tax credit is then distributed back to individual farmers.

Farming tax credits

There are numerous tax credits available from your provincial or territorial government, so be sure to search online for credits that apply to your jurisdiction. Here are some regional examples.

  • Atlantic Canada Tax Credit – a 10% deduction against federal income tax payable for eligible expenditures including new buildings, machinery and equipment employed in farming.
  • Ontario Farm Property Class Tax Rate Program – allows farmers to reduce property taxes by paying the municipality’s residential tax rate on the farm residence and the surrounding acre of land and the remainder at 25% of the residential tax rate.
  • New Brunswick’s Farm Land Identification Program – qualified farmers may apply to have their provincial and municipal property taxes deferred when their farmland and outbuildings are registered in the Registry of Agricultural Land.

In addition to tax credits and deductions specific to your farm or agri-business, be sure to check the Canada Revenue Agency website for a complete list of eligible deductible expenses available to all businesses.

(This information is presented for educational purposes only and should not be considered as tax advice. Be sure to consult with a qualified tax specialist to obtain tax advice specific to your business or personal situation.)

Next steps

  • In addition to financial experts with agriculture and farming backgrounds, Scotiabank has farming-specific banking and lending products. Learn more about Agriculture Banking and Financing products available to you.
  • Find out what Scotiabank can do for your farm or agri-business by speaking with a Small Business Advisor by calling 1(877)552-5522 or getting in touch online.

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