The Livestock Tax Deferral provision under the Income Tax Act 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 filing their taxes.
When prescribed regions are identified:
- they are deemed eligible for the entire taxation year
- the list of prescribed regions 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, excess moisture or flooding, farmers may defer this income to the first year in which the region is no longer prescribed.
How are regions prescribed for the Livestock Tax Deferral due to drought, excess moisture or flood?
Agriculture and Agri-Food Canada monitors weather and climate data throughout the growing season.
Regions are prescribed:
- when they experience conditions associated with significant decreases in forage production due to drought, excess moisture, or flooding
- on the advice of the Minister of Agriculture and Agri-Food to the Minister of Finance
- based on weather and climate data gathered and analyzed under the Canadian Drought Monitor (CDM)
- The CDM combines multiple indicators and observed impacts, including a variety of provincial and regional data sources, and reflects consultations with federal, provincial, regional, and academic scientists
Since 2024, the Government of Canada streamlined the process to identify prescribed regions earlier in the growing season.
- Spring: a preliminary list of prescribed regions may now be completed in the spring if conditions indicate a potential forage shortage due to drought, excess moisture or flood
- Other regions may be identified throughout the growing season if significant decreases in forage production are observed
Regions that are nearby to drought, excess moisture, or flood conditions may also be prescribed. Based on stakeholder feedback received over the past two years, these nearby regions are now identified as extended prescribed regions. Previously, since 2024, they were identified as buffered designated regions.
Just as with previous years, where both designated and buffered designated regions were eligible, all prescribed regions, including those identified as extended prescribed regions, will be eligible. This ensures those neighbouring farms that may face the same challenges can still benefit from the Livestock Tax Deferral provision.
Contact information
For questions related to calculating and/or reporting income deferral for regions prescribed due to drought, excess moisture or flood 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.
For more information on the process or criteria to identify regions prescribed due to drought, excess moisture or flood, please contact aafc.taxdeferral-reportdelimpot.aac@agr.gc.ca.
List of prescribed regions
Regions prescribed due to drought, excess moisture or flood eligible for livestock income deferrals by year: