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Year-End Tax Planning Thoughts for Farmers


​​As year-end approaches, one of a farmer’s main concerns is minimizing tax. In Canada, farming income is taxed on a cash basis so there are many ways to reduce it. However, care should be taken to tailor your strategy to your specific situation.

Below are eight key considerations when doing your year-end tax planning:

  1. Inventory – one of the simplest ways to reduce income is to not sell any crop or wait until after year end to sell it;

  2. Receivables – deferring payment of crop sales is another way to move income to next year and many companies are more than happy to delay payment. However, ensure that these companies are reputable so that you aren’t left with a bad debt instead of a deferral;

  3. Payables – make your suppliers very happy and pay all your bills before year end;

  4. Prepaids – pay for expenses for next year including fuel, fertilizer, repairs, chemicals, rent, etc.

  5. Capital assets – purchase before year end to get a CCA deduction;

  6. Leases – can be structured to obtain deductions faster than purchasing equipment directly. Make sure that the economics works and you aren’t paying too much to get that tax deduction;

  7. Commodity purchases – as long as purchases are made for the operation of farming, they can be deducted. Examples would be cattle and other commodities used in the operation of farming; and,

  8. Life insurance premiums – can be deducted if required for debt but are limited to the net cost of pure insurance.

This is not a comprehensive list; just one to get you thinking. Make sure you work with your advisor to calculate where you are at as year-end approaches to ensure you don’t overspend.

You may also be interested in this article:

Should You Be Thinking About Capital Gains Tax Now?

If you need assistance with your year-end tax planning, contact Bruce Warkentin, CPA, CA, CBV, at 403.317.2795 or [email protected], or your local MNP Agriculture Business Advisor.