Capital Gains Tax When Selling Farmland in Saskatchewan — What You Need to Know

Selling farmland can trigger a significant capital gains tax bill — but Canadian tax law includes several provisions specifically designed for farm property. Here’s what Saskatchewan landowners should understand before listing.

How Capital Gains Work on Farmland

When you sell farmland for more than you paid (or more than its fair market value on Valuation Day if you’ve owned it since before 1972), the difference is a capital gain. In Canada, only 50% of a capital gain is taxable — meaning half is included in your income for the year of sale. For gains above $250,000 in a year the inclusion rate rises to 66.7% under current rules, so tax planning around thresholds matters.

Lifetime Capital Gains Exemption (LCGE)

This is the single most valuable tax tool for farm sellers. Qualified farm property is eligible for the Lifetime Capital Gains Exemption, which as of 2026 shelters over $1.25 million in capital gains per individual from tax. If you and your spouse both qualify, that’s potentially over $2.5 million of tax-free gain on your farm sale. To qualify, the property must have been used principally in farming by you, your spouse, or your children for at least two years before the sale.

Intergenerational Farm Transfers

Transferring the farm to your children? Special rollover provisions under the Income Tax Act allow you to transfer qualified farm property to children or grandchildren on a tax-deferred basis. This means the transfer can happen at your adjusted cost base rather than fair market value, deferring the capital gain until your child eventually sells. Recent changes have also expanded the definition of qualifying transfers.

Capital Gains Reserve

If the buyer is paying over time (common in farmland deals), you can spread the capital gain over up to five years using a capital gains reserve. This keeps you in a lower tax bracket each year rather than reporting the entire gain in one shot.

Talk to Your Accountant First

Every situation is different. The interaction between the LCGE, principal residence exemption, alternative minimum tax, and provincial tax credits means the optimal selling strategy varies widely. Work with an accountant who specializes in farm tax well before you list — not after you’ve already signed an offer.

Thinking about selling? Get a confidential farmland valuation from Adam Hungle, and connect with farm tax specialists who can help you keep more of your proceeds.