Save Your Seed Money in Canada with CRA Farm Tax Tips
Won’t you, as a farmer, want to reap the most from what you sow? The CRA tax experts can help you with this!! Whether dairy, fruit, or livestock – after all, farmers of all types contribute to the economy and health of Canadians. That is why the Canada Revenue Agency (CRA) wants to help in making it easier for you to file your income tax and benefit return. They aim to help you save your time and energy for a better harvest.
If farming is more like a hobby to you, you can’t deduct any expenses or losses. On the other flip, if your farming activities are more extensive and performed in a business-like manner, you’re running a farming business.
Remember that farming income does not comprise money made from trapping or working as an employee on a farm. Willing to dig deeper? Carry on reading!!
Claiming Expenses
Farmers can usually deduct any reasonable current expense from farming income along with interest on loans and losses, cost of fertilizer, feed, veterinary fees, materials to pack and ship commodities, etc. Other relevant expenses include insurance, machinery rental, electricity, motor vehicle expenses, etc.
During harvesting your crops, you may need a helping hand in the field. At this point, if you hire someone, it may be claimed as an expense. You may also claim the apprenticeship job creation tax credit if you hire a qualified Red Seal trade apprentice, such as an agricultural equipment technician.
This non-refundable investment tax credit is 10% of the salary or wages of an apprentice. For each eligible apprentice, the maximum credit an employer can claim is $2,000 per year.
Reporting income or loss
Just like with any other business, every single year may not be profitable. You are likely to have a net loss when your farming business outlays are more than your farming business income per year. You can transfer a farm loss amount back to any of the previous three years or forward to any of the next 20 years for the deduction of the loss from income for another year.
Under the livestock tax deferral provision, qualified farmers disposing of breeding livestock in a tax year for flood or drought can eliminate part of the sale proceeds from their income up to the next tax year. This provision covers certain breeding bees and breeding horses over 12 months of age.
Clearing your return
30th April 2021 is the authorized deadline for most Canadians to file their income tax as well as benefit return. Self-employed people and their spouses or common-law partners can file their returns until June 15.
If you’re undergoing any cash flow problems and are unable to pay your tax balance in full, you can pay off your tax debt in multiple payments. At this point, you can make a pre-authorized debit payment agreement through the My Business Account of CRA or My Account service.
Guard yourself
At the time of filing your return, make sure you do not intentionally underreport your income since that will pose risk to your reputation and your business.
Hopefully, this blog will serve as a great guide!! We will be discussing more on this topic in our upcoming blogs. So, please check our blog page from time to time!