Selling farmland in Saskatchewan can be both a significant financial decision and an emotional one, especially if the land has been in your family for generations. One of the most important financial aspects to consider is the impact of capital gains tax on the sale.
Whether you’re retiring, transferring the farm to your children, or simply selling an investment, it’s crucial to understand how capital gains tax works and how it could affect your bottom line.
What Are Capital Gains?
A capital gain occurs when you sell a property for more than you paid for it. The difference between the sale price and the adjusted cost base (ACB) of the property—plus any expenses related to the sale—is considered your gain. In Canada, 50% of the capital gain is taxable and included in your income for the year.
How Capital Gains Apply to Farmland
Farmland in Saskatchewan can be subject to capital gains if it has appreciated in value since it was purchased. However, the Canadian tax system provides a few significant exemptions and strategies that can reduce or even eliminate the tax owed:
1. Lifetime Capital Gains Exemption (LCGE)
If the farmland qualifies as qualified farm property, you may be eligible for the Lifetime Capital Gains Exemption. As of 2025, the LCGE allows up to $1 million in capital gains to be exempt from taxes when selling or transferring qualifying farm property.
To qualify:
- The land must have been used principally in a farming business in which you, your spouse, or a family member was actively involved.
- There may be holding period and use tests—it’s important to consult a tax advisor.
2. Intergenerational Farm Transfer
If you’re transferring your farm to a child or grandchild, you may be eligible for a rollover provision, which allows you to defer capital gains taxes until a future sale. This is especially useful for keeping farmland within the family without triggering immediate tax consequences.
3. Capital Gains Reserve
You can also use a capital gains reserve if you’re selling the farm and receiving payment over time. This allows you to spread the capital gain over up to five years, potentially reducing your annual tax burden.
Planning Ahead: Tips for Farmland Sellers
- Get a professional valuation – Knowing your land’s fair market value can help with planning and negotiation.
- Work with a tax professional – Tax law is complex and having a farm-savvy accountant can save you thousands.
- Consider succession planning – If family members want to take over the farm, get legal and financial advice early.
Selling farmland isn’t just about the price per acre—it’s about securing your financial future and understanding the tax implications. With the right guidance and strategic planning, many farmland owners in Saskatchewan can take full advantage of capital gains exemptions and minimize taxes owed.
As a Saskatchewan-based real estate agent with deep roots in the farming community, I’m here to help you navigate the sale process confidently and connect you with the right legal and financial resources.
