ONTARIO – As farmers, we spend a lot of time thinking ahead – planning for the next crop year, the next livestock cycle, the next equipment purchase, or even the next generation on the farm. But when it comes to taxes, too many of us still treat year-end planning as something we deal with only when December rolls around. The end of the year is a good time to review and take stock, but planning really should be happening all year long.
Tax law is not static. It changes at the will of government, and the pace of change has only increased in recent years. The latest federal budget included several updates that directly affect farm businesses, from capital gains rules to investment incentives. If you’re not a tax expert – and most of us aren’t – it’s more important than ever to engage with someone who is.
At the Ontario Federation of Agriculture (OFA), where I serve as a member of the board of directors, we recognize that individual farm businesses don’t always have the time or resources to stay on top of every tax change.
That’s why our organization takes an active role in highlighting key updates and helping farmers understand what they mean in practice. Just recently, for example, we partnered with accounting firm MNP to offer a webinar on what the most recent federal budget means on the farm. If you haven’t seen it, I encourage you to visit the OFA website to watch it as it’s a valuable starting point for understanding what’s changed and what you should be thinking about now.
One of the first things farmers need to understand is that not everyone has the same year-end. Some farms operate on a calendar year, while others have a corporate fiscal year that ends at a different time. Knowing which applies to you is critical, because it affects when income is reported, when expenses can be claimed, and when planning decisions need to be made.
There are multiple layers of taxation to consider – federal, provincial, and municipal – and there are also regional opportunities that can easily be missed. For example, there may be specific tax credits related to buildings, infrastructure, investment or other financial aspects in northern or other designated regions of Ontario that could be beneficial to your business. If you’re not engaged with a knowledgeable advisor, you could be leaving money on the table.
To put it simply, professional advice is not a luxury; it’s a necessity, especially when we consider the size and complexity of today’s farming businesses. Succession and estate planning make this even more critical. For example, the latest federal budget proposes increasing the Lifetime Capital Gains Exemption to $1.25 million and indexing that to inflation, meaning it will continue to grow over time.
That’s a significant opportunity – but only if your farm business meets the eligibility requirements for this exemption, so it’s important to plan for this.
It’s also important to think about how you pay yourself and how the business pays itself. That includes decisions around Canada Pension Plan contributions, income versus dividends, RRSPs, and retained earnings, and how your farm business is structured will influence how those decisions are made. Sometimes money needs to stay in the business for financial reasons, such as upcoming purchases, building projects or other investments. Those decisions should be part of a long-term growth strategy, not just a snapshot of this year’s numbers.
Capital cost allowance, which is the write-offs you claim over time on things like equipment and buildings, is a good example of why tax planning shouldn’t start at the end of the year. When you buy or upgrade assets, it can change how much you can deduct this year versus future years. Ideally, planning should look several years ahead – but if you haven’t started yet, year-end is still a good time to begin. The bottom line is this: tax planning is not just about minimizing what you owe today. It’s also about positioning your farm for stability, growth, and a successful transition to the next generation.
OFA will continue working to raise awareness and provide tools to help farmers navigate these changes – but the most important step is engaging early, asking questions, and building a plan.
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Clint Cameron is an Ontario Federation of Agriculture director.