Growing your tax return: Deductions for agriculture businesses

Farming can be a tough business. Fortunately, as a full-time Canadian farmer, you qualify for a number of tax deductions to help you maximize the earnings you keep. In addition to the usual tax breaks other businesses can claim, farmers can leverage unique agribusiness tax deductions that can have a significant impact on your return.

Here are some examples of the specific agribusiness deductions for farmers. Be sure to talk to your tax accountant or go to cra.gc.ca/farming for more details on these and other tax deductions.

Operations expenses: Generally, farmers can deduct any reasonable current expense incurred to earn farming income, including interest on loans, the cost of fertilizer, feed, veterinary fees, and materials to pack and ship goods. Other eligible expenses may include machinery rental, electricity, insurance, and motor vehicle expenses.

Income losses: If you had a farm loss for the year, you might be able to deduct up to the full amount of your loss. Full-time farmers can deduct income losses from their net income going back three years or carry forward up to 20 years. For example, if your farm ran a deficit two years ago, but has made a profit this year, you can deduct that loss from this year’s income on your tax return.

Livestock tax deferral: Owners of breeding livestock who are forced to sell all or part of their breeding herd due to drought or excess moisture and flood conditions, are eligible for a one-year tax deferral on a portion of the income from those sales. This helps eligible producers replenish breeding stock in the following year. In the case of consecutive years of drought or excess moisture and flood designation, producers may defer sales income to the first year in which the area is no longer designated. Eligible producers will be able to request this deferral when filing their income tax returns.

Capital Cost Allowance: This program replaces the eligible capital property (ECP) system. It provides an annual allowance to cover expenditures related to property that has no physical existence but provides a lasting economic benefit. Some examples include milk and egg quotas, franchises, concessions, or licenses for an unlimited period. The price you pay to buy this kind of property is an eligible capital expenditure.

Apprenticeship tax credit: If you employ an agricultural equipment technician or other qualified Red Seal trade apprentice, you likely qualify for the apprenticeship job creation tax credit. This non-refundable tax credit is equal to 10% of the eligible salaries and wages payable to eligible apprentices. The maximum credit an employer can claim is $2,000 per year for each eligible apprentice. Any unused credit may be carried back 3 years and carried forward 20 years.