July 9, 2025 | Selling
Is there Capital Gains Tax on Farmland in Canada?
When you are planning on selling a farm, you will want to consider the capital gains on your land and how this is going to impact you. The first step in determining if Capital Gains Tax applies to you is determining if you own a Qualified Farm Property (QFP).
This is a designation used by the Canada Revenue Agency (CRA) to conclude whether the sale of farmland (or related assets) is eligible for special tax treatment, including the Lifetime Capital Gains Exemption (LCGE).
Here are some examples of Qualified Farm Properties
- Farmland
- Buildings used in farming [Barns]
- Specific Quota [Dairy or Poultry]
- Shares in a farm cooperation
- Interests in a family farm partnership
Eligibility Rules for Farmland in Canada
The two main factors influencing whether you will qualify for capital gains are: the amount of time you have owned the farmland and the specific usage of that land.
Ownership: For your farmland to qualify, it must be owned by you or an immediate family member for a period longer than 24 months. This is the basic requirement of ownership before it is sold.
Usage: The second requirement is that in at least two of the last five years, the property must have been used in an active farming business where you, your spouse and your common law partner or an immediate family member, is on title for the farm land and has maintained in for more than 24 months and benefitted from that land as their primary source of income.
Looking for more farm-related real estate resources? Check out these blogs next!
- Your Guide to Starting a Farm in Ontario
- What to Know About Buying a Horse Farm
- Where Can I Buy a Hobby Farm Near Toronto?
Do You Pay Tax When You Sell Farmland?
The short answer is yes, but you won’t always have to pay a full amount. When you sell Farmland for more than you paid for it, the Government sees this difference as “profit,” and that “profit” is called Capital Gains. In Canada, Capital Gains on farmland is usually taxable.
So, how does this work? Here is a common circumstance to break things down:
Let’s say you bought a 10-acre property for the price of $300,000 five years ago. Now that you are looking to sell, you have been informed that this land is highly desirable due to the nearby town’s expansion. The Realtor provides an Opinion of Value that reads $600,000. You list and sell the property shortly after for asking ($600,000), and the difference between the original purchase price and the new sold price is $300,000.This difference is called Capital Gains, which is the amount of profit you will be taxed depending on how much you’ve profited off of your farmland.
However, you will NOT pay tax on the entire $300,000; instead, you will register some of this amount as taxable income, which will be taxed. Now, this may not be the happy answer you were looking for, so let’s switch gears and focus on avoiding and reducing Capital Gains tax in Ontario.
Capital Gains Exemption for Farm Properties
If you wish to reduce or avoid Capital Gains tax, you will want to:
Consider if your property qualifies based on duration of ownership and usage of the farmland as a Qualified Farm Property. If so, this will open up doors for you, meaning a portion or the entire amount (in some cases) will be taken off your taxes. There a program in Ontario called a Lifetime Capital Gains Exemption, and it can protect up to $1.25 million in profits from farmland (if you qualify).
What if you are Passing the Farm to a Family Member? — Then this process is much easier because you can title transfer the property over to an immediate family member and or a spouse. This choice is often referred to as a rollover, and it will delay the taxes until the new owner chooses to sell in the future.
HST or GST on Farmland Sales
Ontario’s harmonized tax rate is 13% and whether this is something charged at the time of the sale depends on what you are selling, who you are selling to, and how the land is used.
Selling Bare Farmland to a Farmer
If you are just selling bare land to a farmer, not one with outbuildings or residences, and lets say that the farmer continues to use that land for the purpose of commercial farming… this can result in an exemption from HST.
If part of what you are selling qualifies as an ongoing farm business then you and the buyer can file what’s called a GST44 Form, which will assist in the chances of a tax-free transaction- however, at least 90% of the farming assets such as the (land, barns/auxiliary buildings and or equipment) must be included in the sale.
On the flip side, if you are selling bare land on the open market and it does not sell to a farmer who will not be using it for farming, then it will be taxed, and you have to change the applicable amount either included in or additional to the saleprice.
Thinking about buying a rural home? Check out these related blogs next!
- How to Buy a Rural House in Ontario
- Acreage Landscaping Ideas to Increase Property Value
- Tips For Transitioning to Rural Living
How to Approach A Rural Sale
When an agent from Capstone approaches a rural sale, we begin by internally preparing. The internal prep work involves looking into comparables in the area, creating a strategic price strategy and thoughtfully positioning the property. Every property tells a story and falls into a specific niche, and it is our job to find the one that speaks to your sale the most.
The next step in approaching a rural sale is identifying the intricacies of the property to ensure that all of the utilities (heat, hydro, water, etc.) are all inspected and to code. If there are auxiliary buildings, we will ask about the utility access, building permits, GRCA restrictions, special features, updates and structural integrity.
Marketing Your Rural Home
The launch is the third process, and this is when we bring in our professional photographer and videographer (if video footage best highlights the property). We work exclusively with a digital media strategist, ensuring that all our properties receive the same full-service, quality of media, and are highlighted to show off their selling features. From there, we amplify your listing through our internal database of vetted buyers, consisting of over 10,000 clients and personal connections.
We utilize the MLS system, which puts your home in front of thousands of Realtors and prospective buyers across Ontario. We are members of both the Guelph-GTA local MLS and the Kitchener-Waterloo MLS, offering you cross-board access.
We approach every deal with strong, clear and confident negotiation. It is our promise to constantly communicate with you from the beginning to the end. However, our relationship doesn’t just stop at the end of the transaction. Our agents are sure to keep in touch with you regarding market updates, community events, new investment opportunities, etc. Through the closing process of your transaction, our back-end team in Operations and Management is dedicated to guiding you through the steps to a smooth close. Having a team member one email away is something we pride ourself on because it allows us to provide you a platinum level of full-service.
Browse our Rural Home page to see how we do Rural Real Estate Differently.
Breaking it Down
Here is a breakdown of the scenarios we have discussed and if Capital Gains Tax applies to you:
- Bare farmland sold to a farmer: NO
- Bare farmland sold to a NON-farmer: YES
- Farmland with a house and barn sold to ANY buyer: YES, but this will be considered two transactions, and the farmland part will depend on the continued use.
- Sold to family for personal use: NO
Sold to family for the purpose of farming: YES, but you can apply for a roll period where the tax can be paid at a later date, while the ownership is in the process of transferring
Why Work With Our Rural Agents
When you choose to work with an agent experienced in rural real estate, you’re ensuring a higher level of due diligence. Rural properties come with unique considerations that can be overlooked by agents without specialized knowledge. For example, many rural properties fall under GRCA regulations, which may impose restrictive covenants on land use and development. A rural expert will review mapping in advance and address these factors clearly in the listing.
Utilities are another key distinction. Unlike urban homes, rural properties often rely on wells, propane, and wood heating systems, all of which require ongoing maintenance and safety testing. These are just a few of the intricacies a knowledgeable rural agent will identify and assess strategically when preparing your property for sale.
Agents who specialize in rural real estate are well-established within their communities and professional networks. This local presence creates greater exposure for your property through targeted outreach to farmers, buyers transitioning from the city, and active clients following rural inventory. Listing with an agent who understands and has access to the right buyer pool makes a measurable difference.
Results in Action
In July of this year, we took over a listing that had been on the market for more than a year with an out-of-town agent whose focus was primarily residential real estate. Located in Elora, the home had been widely seen by locals with little traction.
After implementing professional photography, launching a refreshed marketing strategy, and promoting the property to our internal network of over 10,000 contacts while collaborating with local agents who had qualified buyers, the home sold within four months… despite a buyer’s market. This result underscores the value of working with a local Realtor who truly specializes in rural real estate.
How to Sell Farmland in Ontario
This blog post has broken down how Capital Gains tax is applied in various selling circumstances and how this will impact you, the current owner and the future owner. Always do your diligence and check to see if there are any additional buildings on the property that may be exempt from taxes– then the sale can be split accordingly.
However, the BEST option if you are unsure is speaking with a Licensed Salesperson who specializes in Agricultural Real Estate so that you, first of all, know the arrangement of taxes prior to selling and can then seek out the best option for your wallet. In the long run, hiring a seasoned Realtor with a specialization in Agriculture ensures that you have a highly seasoned professional with your best interest at heart and, more to that, will back up your interests with real-time results.
So if you are considering selling your Farmland, whether this is to a close friend, family member or on the open market, we would love to align you with our rural agents who will have the skill set necessary for your property.
Reach out and start your selling journey today: operations@capstonereps.com or call us at 519-824-9050.
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