Farm Tax Rollover in the 2026 Budget, Explained

Direct answer: Budget 2026, tabled Nov. 5, 2026, proposes to widen the intergenerational farm rollover so farm property can pass to a niece, nephew, grandniece or grandnephew without triggering an immediate capital gain. Today the rollover covers children (including grandchildren and great-grandchildren) and a child's spouse. The change would apply to transfers on or after Jan. 1, 2027. It is a budget proposal, so it still has to pass Parliament.

The Income Tax Act lets certain farming and fishing property move from a parent to a child, or the child's spouse or common-law partner, with the capital gains tax deferred. For this rule, "child" already includes grandchildren and great-grandchildren.

Transfer to anyone outside that circle and the farm is treated much like a sale, with the tax bill to match.

Plenty of farms have a son or daughter in the city and a nephew who actually stayed. Until now, handing that nephew the land meant a much bigger tax hit than handing it to your own kid. The proposal closes that gap.

Farm groups, including the Canadian Cattle Association, welcomed the change after the budget landed.

Budget 2026 also proposes the Productivity Mega Deduction, which lets businesses write off some investments right away instead of depreciating them. Finance Canada's proposal would permanently allow immediate expensing for most depreciable property acquired on or after Sept. 15, 2026, with the deduction taken in the year the asset becomes available for use. For a farm, eligibility depends on the asset's capital cost allowance (CCA) class, not simply on its use in agriculture. The exclusions include buildings and additions in Classes 1 and 3; property in Classes 14, 14.1 and 51; certain vehicles in Classes 10 and 10.1; and property depreciated under Schedules V and VI of the Income Tax Regulations. Used property would qualify only if neither the buyer nor a non-arm's-length person previously owned it and it was not acquired through a tax-deferred rollover. Individuals and partnerships with individual members would also face restrictions on creating or increasing a loss. Check the asset's classification and your own eligibility with your accountant before buying.

Livestock tax deferral already covers drought, flooding and excessive moisture; it is not a new excessive-moisture benefit in Budget 2026. CRA says the measure applies to 2014 and later tax years. In a prescribed region, a farmer who sells breeding livestock because of those conditions may defer part of the income from net sales. AAFC's rules require a breeding-herd reduction of at least 15%: a reduction of 15% to less than 30% allows a 30% deferral, while a reduction of 30% or more allows a 90% deferral. The income is normally included the following year, or the first year the region is no longer prescribed if qualifying conditions continue.

Nothing changes before Jan. 1, 2027, and the details could still shift as the measure goes through Parliament. If a niece or nephew is part of your succession plan, take it to your accountant now. Don't wait for the bill to pass.

Under Budget 2026's proposal, a qualifying transfer to a niece or nephew on or after Jan. 1, 2027 could defer the capital gain, the same way a transfer to a child does now. It is not law yet.

Yes. The proposal includes nieces, nephews, grandnieces and grandnephews of the farmer's spouse or common-law partner.

For transfers on or after Jan. 1, 2027, if Parliament passes it.

See also our budget-day story, Federal Budget Adds Farm Write-Off, Wider Rollover, and Saskatchewan Farmland Ownership Rules.