Through the 2019 tax year, your British Columbia clients who farm can claim an additional tax credit. The Canadian government is rewarding farmers who donate food they grew within British Columbia to certain charities, food banks, or school meal programs. The British Columbia farmers’ food donation tax credit is a nonrefundable credit worth up to 25% of your farming client’s qualifying gifts for the tax year. Your client can take this credit in addition to any other charitable or other gift tax credits.
The credit can be claimed by either an individual or a corporation, and the process is a little different between the two. Your farming corporation clients have to complete Schedule 5 (Tax Calculation Supplementary – Corporations) and report line 683 on their T2 Corporate Income Tax Return. Your individual farming clients claim the credit on their T1 form.
Your client can’t take this credit for donating live animals, tobacco, alcohol, or marijuana products. In addition, anything your client has produced such as pies, sausages, beef jerky, pickles, or preservatives don’t count for the credit. When your client gives away eligible goods, they have to get a receipt from the donee describing the goods.
The donee has to use fair market value when computing the value of the goods. This is typically the best price the goods would have sold for in an open market. The Canada Revenue Agency has some guidelines to help your client determine the fair market value of the donation. If the total value of the donation is less than $1,000, the donee may determine its value. If it’s more than this, your client’s donation has to be evaluated by someone specifically competent and qualified with the particular product being donated.
Help your farming clients by landing them an extra tax credit on their income tax return. The British Columbia farmers’ food donation tax credit rewards farmers who donate food. Make sure to check with your clients so they can be rewarded for their charity.