Tax Tips for Farmers

  1. You may be able to reward farm employees, including family members, with retiring allowances as you approach the point of winding up your business. The amount you pay is a deduction against farming income for tax purposes.
  2. If you’re researching crop development or livestock hybrids, you may be eligible for generous investment tax credits so talk to a tax planner about the possibilities.
  3. If you keep dogs or cats on your farm to control rodents or wild animals, expenses for maintaining them are tax-deductible.
  4. You can use income splitting to reduce your tax bill by paying your family members reasonable salaries for their contributions to the farming business.
  5. You are entitled to a one-time, $750,000 lifetime capital gains exemption that can be claimed against capital gains realized when you sell your farm. You can further reduce the tax bill if your spouse and children also clain capital gains exemptions. Talk to a professional tax planner for more information.
  6. Make sure you have a succession plan. Otherwise your business could pass on to family members who might not be the best choice for continuing your business (or who might be unwilling or unable to). Also, without a succession plan, your family might face higher than expected estate taxes, possibly requiring them to sell the farm to pay the taxes.