In British Columbia, farmers may claim a special tax credit for donating food to eligible charities. You can claim this provincial credit in addition to the federal credit for charitable giving, and both credits help to offset the income tax you may owe.
Eligible donations for the B.C. farmers’ food donation tax credit include agricultural products such as meat, eggs, dairy products, vegetables, fruits, grains, nuts, and pulses. You may also donate honey, maple syrup, mushrooms, fish, seafood, or almost anything else produced on a farm in British Columbia. However, donations of live animals and marijuana do not qualify for this credit.The donated items must be minimally processed. For example, if you are donating chicken, the chicken must be butchered and packaged as legally required for sale in Canada. However, to be eligible for this credit, you cannot roast chickens or make chicken pot pies and donate them. Similarly, while you may donate fruit, a donation of fruit pies does not qualify for this credit.
Eligible donees must be registered charities devoted to providing free food to people in British Columbia. Additionally, you may donate agricultural products to a school meal program. Unfortunately, if you make a food donation to another type of registered charity, it does not qualify you for the B.C. farmers’ food donation tax credit.
When you donate the agricultural product, the donee should issue a receipt with details about the donation and its fair market value. If you make a donation with a group of farmers, give the donee detailed information about all of the farmers involved. This way, the donee can issue receipts for each of you that have information about your portion of the donation. You need these gift receipts to claim this credit on your tax return.
Eligible donations must be made after Feb. 16, 2016, and before Jan. 1, 2019. With its 2016 budget, British Columbia introduced this credit for tax years 2016, 2017, and 2018. The tax credit will be reassessed after that time to determine if it will be offered in future years.
When to Claim the Credit
You may claim the B.C. farmers’ food donation tax credit in the year during which you made the donation, or if you like, you may claim this credit up to five tax years after making the donation. For example, if you make a qualifying donation in tax year 2016, you may claim the credit on your tax return for years 2016 through 2020. The credit is nonrefundable; it can reduce your tax owed but cannot create a refund. As a result, you may want to save the credit for a year in which you owe a lot of income tax.
To illustrate, imagine you make a qualifying donation in tax year 2016 and become eligible for a $1,000 credit. However, you only owe $200 in taxes. In this case, your credit covers your tax bill, but the remaining $800 of the credit is lost. If you anticipate earning more money and facing a larger tax bill the next year, you may want to save the credit to apply to that tax bill. Unfortunately, you cannot split the credit up; you must claim it all in the same year, and furthermore, you must claim the credit in the same year you claim the federal credit for charitable giving.
Federal Credit for Charitable Giving
In addition to the B.C. farmers’ food donation tax credit, your donation can also qualify you for the charitable giving tax donation from the Canada Revenue Agency. This federal credit applies to cash or property donations made to registered charities, and by extension, it also covers the donation of food to registered food banks or similar charities.
The CRA has a formula in place to calculate your tax credit based on the value of your donation, and to calculate your credit, you must complete Schedule 9 and transfer the relevant numbers to your federal income tax return as directed. Like the provincial credit, this credit is also nonrefundable, meaning it does not create a refund.
Claiming the B.C. Credit
If you are claiming the B.C. farmers’ food donation tax credit on behalf of a farming corporation, use a T2 form. If you are a farmer who is not incorporated, you may claim this credit on your T1 income tax return, or your spouse or common-law partner may claim it. For instance, if you are a self-employed farmer or part of a partnership, you should claim this credit on your T1.