With tax season on us, Three Ridges Ecological Farm held a Kitchen Table Meeting on Tax Tips for Farmers. Greg Schoniker from FBC in London dropped by the farm to discuss all things farm taxes. The four of us in attendance all learned something important so I thought I would share Greg’s tips and advice.
FBC’s Top Tax Tips for Farmers:
- Keep good records! This includes readable copies of all your receipts, and credit card statements aren’t receipts!
- Always file a tax return AND file on time – even if you don’t owe! Late filings increasing your chance of an audit!
- Time capital gains and losses to reduce your overall tax burden. This is especially important for large purchases or sales with large capital gains.
- Plan borrowing to avoid losing tax deductions. Separate loans between personal and business to help identify tax deductions, remembering that interest is a tax deduction.
- Make mortgage interest tax deductible. Consider refinancing and investing the equity in your business.
- Get the facts before you rent out a portion of your property! Aside form legal implications, there are tax implications to consider, like depreciation on part of your primary residence.
- Use spousal RRSP to split income. This is especially pertinent if the farm business structure is sole proprietor.
- Plan your RRSP contributions. The tax deduction of RRSP may be better used in years when you anticipate having higher net income, while Tax Free Savings Accounts may be better used in lower income years.
- Invest in a Tax Free Savings Account.
- Have a Risk Management Plan.
Some other tips we took away from the KTM:
- Keep a vehicle log for all vehicles driven for farm-related activities.
- Each farmer-owner is eligible for up to $1 million in Capital Gains Exemptions, which need not be only on the gains on a property.
Similarly, ACORN released a blog by Coastal Tax and Accounting Services about Tips for Small-Scale Farmers, which you can read here.
Also note there will be a similar Tax Tips Webinar in May – keep an eye out!
This blog cannot and does not replace or substitute in place of a consultation with a knowledgeable accountant who may offer tax advice based upon the specific circumstances of your situation, and the tax layws in effect in your geographical location and jurisdiction.