There are four major changes to the rules around farm class for the 2013 and following tax years:
1. increased tax exemptions for farm buildings other than farmer's dwellings;
2. new qualifying agricultural uses and products/services;
3. farm class for retired farmers’ dwelling land in the ALR and related tax exemption for the dwelling in rural taxation areas; and
4. new income reporting periods.
Increased Tax Exemptions for Non-Dwelling Farm Buildings
In municipalities, the current tax exemption for farm buildings, other than farmer's dwellings, is capped at $50,000 of the total of the farm buildings’ assessed value.
Now, this exemption will be $50,000 or 87.5% of the total assessed value of farm buildings, whichever is greater.
This exemption will also apply for school tax purposes.
All farm buildings in a rural taxation area, including farmer's dwellings, will continue to be entirely exempt from general provincial tax. Farmer's dwellings will remain taxable for school purposes, but the school tax exemption for farm buildings other than farmer's dwellings will be capped at the greater of $50,000 or 87.5% of the buildings assessed value.
For example, in a municipality, farm buildings assessed at $500,000 will only be taxed on $62,500 of the value for the 2013 tax year versus $450,000 for the 2012 tax year. A farmer’s dwelling in a municipality is fully taxable.
In a rural taxation area, farm buildings assessed at $100,000 will only be taxed for school purposes on $12,500 for the 2013 tax year versus $50,000 for the 2012 tax year. A farmer’s dwelling in a rural taxation area will be fully taxable for school purposes.
New Qualifying Agricultural Uses and Products/Services
The following agricultural land uses are now eligible for farm class:
• land used to manage maple and birch trees for the production of sap or syrup (e.g., income from sap or syrup);
• land used for the production of breeding products as part of a livestock operation (e.g., income from sales of livestock semen, ova and embryos);
• land used for the provision of horse stud services as part of a horse rearing operation (e.g., fees from horse stud services).
Farm Class for Retired Farmers’ Dwelling Land in the ALR and Related Tax Exemption for the Dwelling
Land used for a retired farmer’s dwelling may now qualify for farm class provided all of the statutory and regulatory conditions are met, some of which include:
• the land is owned by a retired farmer or spouse of retired farmer;
• the dwelling land is in the ALR;
• the dwelling is the owner’s principal residence;
• some portion of the dwelling parcel or an adjacent parcel continues to be farmed;
• the applicant is at least 65 years old;
• the retired farmer has farmed land owned by him or her for at least 20 years;
• an application is made each year by October 31.
Additional conditions apply. For more detail, please see Classifying Land Used for a Retired Farmer’s Dwelling.
If all the conditions are met, a retired farmer’s dwelling in the ALR and in a rural taxation area will only be taxable for school purposes.
New Income Reporting Periods
Currently, the reporting period for farm assessment purposes is the 12-month period ending October 31 of the tax year in which a roll is being prepared, or October 31 of the previous tax year.
The reporting periods are changing so producers are only required to calculate farm income information once per year (e.g., for income tax purposes and assessment purposes).
The reporting periods for the 2013 tax year will be unique to facilitate the transition from the current farm assessment reporting periods to the reporting periods based on the producer’s income tax year.
For the 2013 tax year, the income requirements must be met in the 12-month period ending October 31, 2010, or one of the two following periods:
(1) if you are an individual, the 14-month period ending December 31, 2011;
(2) if you are a corporation or a partnership, your income tax year ending in 2011.
For the 2014 and subsequent tax years, the income requirements must be met in one of following two periods:
(1) your income tax year ending three years before the tax year (e.g., ending in 2011 for the 2014 tax year);
(2) your income tax year ending two years before the tax year (e.g., ending in 2012 for the 2014 tax year).
A sale is still required in each reporting period.
With respect to new farm applications and developing farms, income earned in the taxation year the application is made or production commences (as applicable), may qualify land for farm class the following tax year. There is a different reporting period applicable in these situations because there is no history of farming.
Click here for the General Application for Farm Classification.
For further information on farm classification, please see Classifying Farm Land.