10 tips to help farmers get the largest return possible
By Diego Flammini
Assistant Editor, North American Content
Farms.com
As the old adage goes, “the taxman cometh.”
And like everyone else, farmers want to get the largest return possible.
Here are 10 tips to help you maximize your chances of having a stress-free tax season.
1. Keep good records – Keep all records up to date because disorganized books can be a reason to get audited.
2. Always file a tax return and file on time
3. Time capital gains and losses to reduce your overall tax burden – If farmers earn a capital gain early in the tax year, they can choose to recognize capital losses near the end of the year to offset the gains.
4. Plan borrowing to avoid losing tax deductions – Separating loans between personal and business can help tax preparers and CRA identify tax deduction opportunities.
5. Make mortgage interest tax deductible – Farmers could consider refinancing and investing the equity into their business.
Getty/MattZ90
6. Know your capital gain reserve benefits for property to a child – The reserve can be claimed up to a maximum of nine years, which spreads out the capital gain over 10 years. The maximum reserve is calculated as a percentage of the capital gain and can be claimed each year.
7. Use spousal Registered Retirement Savings Plans (RRSP) to split income – Moving reportable income to the spouse in a lower tax bracket can help ensure less tax is paid on the same income upon retirement.
8. Plan RRSP contributions – Tax deductions of RRSPs may be better used in years when you can anticipate a higher net income, whereas Tax-Free Savings Accounts (TFSAs) could be an option for years with lower incomes.
9. Invest in a TFSA – Earned interest or capital appreciation is not included as income.
10. Have a risk management plan – Farm risk management plans at the provincial and federal levels can help farmers protect their farm income and investments from unforeseen market circumstances.