Do I Pay Capital Gains Tax When I Sell My Farm in Ontario?

Possibly, but not always. A capital gain on farmland is generally taxed on only part of the gain, because the capital gains inclusion rate remains one-half, and the proposed increase to two-thirds was cancelled on March 21, 2025. A lifetime capital gains exemption can reduce the tax further on qualified farm or fishing property.

For 2025, the lifetime capital gains exemption for qualified farm or fishing property is $1,250,000 of capital gains, which is a maximum capital gains deduction of $625,000, and indexation resumes in 2026. How much of that amount you can use depends on your situation, so it is worth confirming with a lawyer.

If a home sits on the land, any land under it beyond one-half hectare generally does not qualify for the principal residence exemption unless you show it was needed to use the home as a residence. A transfer from an individual to a family farm corporation that will keep farming the land may be exempt from Ontario land transfer tax, but a holding corporation that rents the land to another farming entity does not qualify. Because timing and structure matter, speak with an accountant or lawyer early.