Tax deductions

Tax deductions for Canadian producers

Most of the tax rules that apply to Canadian small business owners also apply to farmers and agricultural producers.

There are, however, certain expenses, tax deductions, and write-offs that apply specifically to income from farming activities that will help lower your tax bill.

Expenses, Tax Deductions and Write-offs for Canadian Farmers
Repair and maintenance of buildings
This includes repairs to fences and buildings used for farming (this excludes your farm).

Expenses related to the professional use of the home
You can deduct expenses related to the professional use of a workspace in your home. This includes a portion of your maintenance costs (cleaning materials, utilities, home insurance) as well as a portion of your property taxes and mortgage interest.

To claim this expense and avoid Canada Revenue Agency (CRA) scrutiny, make sure you have calculated the percentage of your home that is used for your farming business and apply that percentage to the deduction. fiscal.

For example, if you live in a 1,000 square foot house and your workspace is 100 square feet, you are using 10% of your home for business purposes, which means you can deduct 10% of your expenses. .

Capital cost allowance
If you acquire property or depreciable asset for your farming business, such as a building, furniture, or equipment, and it is valued at more than $ 500, you can deduct its cost. over a period of several years. This annual deduction is called capital cost allowance (CCA). There are a few rules you need to follow to claim it.

You cannot deduct its full cost when calculating your net business income for the year in which you acquired the asset or property. It must be deducted over a period of several years.

Elevators, for example, are considered Class 8 property, which allows you to deduct 20% of your annual CCA.

Tractors, trailers and trucks are generally considered Class 10, which allows for a CCA of 30%.

There are different rules and classes depending on the asset, its use and its value. We recommend that you consult a tax expert to determine the optimal application of this deduction.

Land clearing, leveling and drainage
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 purchased to package, contain or ship products or farm products.

Crop insurance, income protection program and stabilization premiums
This includes bonuses for participating in programs like AgriStability, AgriInvest, AgriInsurance, and AgriRecovery.

Custom or contract work (including rental of machines)
This includes the costs associated with hiring subcontractors, renting equipment used to earn farm income (aerators, bulldozers, plows, etc.).

A word of warning: you need to make sure that the fees you pay for subcontracted work would not be considered employee wages, as you could later find yourself at the mercy of unpaid employment bonuses. , taxes and penalties and interest.

Read the additional tax cuts here.

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