The Livestock Tax Deferral provision allows farmers that carry on a farming business in a prescribed area who sell all or part of their breeding herd due to drought, excess moisture or flooding to defer a portion of sale proceeds to the following year. When prescribed regions are identified, the list is posted to this web page.
How the provision works
To defer income, the breeding herd must have been reduced by at least 15%.
- Where the breeding herd has been reduced by at least 15%, but less than 30%, 30% of income from net sales can be deferred.
- Where the breeding herd has been reduced by 30% or more, 90% of income from net sales can be deferred.
In a year in which a region has been prescribed, income from the sale of breeding livestock can be deferred to the next tax year when the income inclusion may be at least partially offset by the cost of reacquiring the breeding livestock. In the case of consecutive years of drought or excess moisture and flood conditions, farmers may defer this income to the first year in which the region is no longer prescribed.
What are the criteria to prescribe drought and flood regions?
Regions are prescribed on the advice of the Minister of Agriculture and Agri-Food to the Minister of Finance.
Beginning in 2024, the Government of Canada streamlined the process to identify prescribed regions earlier in the growing season, and also instituted a buffer zone to adjacent regions to capture impacted farmers on the edges of affected regions.
A preliminary list of prescribed drought and flood regions is now completed in the spring, for those regions where it appears that conditions indicate a potential forage shortage. This first list is based on preliminary weather and climate data gathered and analyzed under the Canadian Drought Monitor. AAFC continues to monitor weather, climate and production data throughout the growing season and will add regions to the list when they meet the eligibility criteria of forage yields being less than 50% of the long-term average due to drought or flooding. A final list of prescribed drought and flood regions, including previously announced regions, is usually made in December when finalized forage yield information is available. However, once a region is prescribed, it is deemed eligible for the taxation year.
Also new for 2024 and moving forward, regions that are adjacent to regions that qualify based on weather, climate and production data will also be prescribed. This will ensure that farms within those adjacent regions that may also be experiencing drought or excess moisture conditions can benefit from the Livestock Tax Deferral provision.
Additional Information
For more information on the process or criteria to identify prescribed drought or flood regions, please contact aafc.taxdeferral-reportdelimpot.aac@agr.gc.ca.
For questions related to calculating and/or reporting income deferral for prescribed drought/flood regions for income tax purposes, please contact the Canada Revenue Agency (CRA) or consult the CRA publication T4002 Self-employed Business, Professional, Commission, Farming, and Fishing Income, Chapter 2 Income. The Livestock Tax Deferral information is detailed in Line 9470 – Livestock and animal products revenue.
Prescribed drought/flood regions eligible for livestock income deferrals by year: