Wednesday, April 28, 2010

Officially a farm!

Today I was finally assigned my Farm Business Registration Number (FBRN)! So in the eyes of government, Black Sheep Farm is now an official farm :D

I had to have my 2009 tax forms completed and send Agricorp my 2009 Statement of Farming Activities showing that the farm had grossed a minimum of $7000 in 2009. I paid my yearly $204.75 fee via a National Farmers Union membership, and I should be getting my 'farm card' in the mail in the next few weeks!

As you may remember from a previous post, I had found the tax filing process rather disappointing on many levels, but I've now reconciled myself to the fact that half of my non-refundable tax credits are useless to me, and am moving on. It's just concrete proof that only those who make a lot of money actually benefit from tax credits, because I certainly benefited greatly from them when I used to make a lot more money than now. People I know who've never made the yearly gross income of your average office worker, are very used to having more non-refundable tax credits than they need.

Some people have commented to me that one of the major tax incentives to being a farmer is reduced property taxes, which is absolutely true. The main reason why I need a FBRN is to maintain my farm's reduced property tax rate (farm tax rate is 25% of the residential tax rate). In the case of my property, less than 50% is taxed at the farm tax rate - my house and one acre of land are taxed at the full residential rate for their MCAP assessed-value (standard for all farm properties). This means that for 2009, I saved $800 or 36%, as compared with having no farm designation.

You may think this is a pretty good deal, but consider that as a person who used to donate around 10% of her gross income to charitable organizations (it took many years of spiritual discipline to get to that point, so it's certainly no easy task), I can tell you that I got a many times more significant tax break from that, and got to support many worthy causes in the process. But given that the average Canadian adult only donates $341 per year (StatsCan for 2004: http://www4.hrsdc.gc.ca/.3ndic.1t.4r@-eng.jsp?iid=69), clearly 10% of gross income isn't anywhere near the norm. So for all those people out there who think farmers get big tax breaks, think again (and think of the tax break you'd get if you donated more money to your favourite causes).

My farm's property taxes for 40 acres of land with a house, bank barn and various outbuildings, are less than my former condo's were for a year. That said, my condo was worth more as real estate than my farm property, and relied on lots of Toronto's urban infrastructure of plumbing, water, gas lines, community services, road maintenance, etc. The farm itself has its own well, septic and heating systems (which I need to maintain), and many fewer community services and roads than an urban environment.

I guess my point is that the urbanite's holy grail of reduced property tax rates isn't the huge tax savings they think it is ;P There are many more effective ways to reduce taxable income or accumulate tax credits than getting a farm designation. People forget sometimes that their urban property taxes do pay for many services. And of course, the value of real estate in Toronto is many times that of rural properties, which is how selling my 711 square foot condo managed to pay for a 40 acre farm with a 2400 square foot house ;)

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