If you operate a farm in Canada, carbon pricing may have increased your fuel costs. The fuel charge proceeds tax credit was created to return a portion of those federal fuel charge proceeds directly to eligible farmers. This refundable tax credit has been available since 2021 and is administered through your corporate tax return.
The official program name is the Return of Fuel Charge Proceeds to Farmers Tax Credit. This credit is a refundable federal tax credit for incorporated farming businesses. You do not apply through a separate grant process or rebate form.
Key points:
Because it is refundable, your business can receive a payment even if you owe no corporate income tax for the year.
To qualify for the fuel charge proceeds tax credit, your farm must meet all of the following:
These provinces use the federal carbon pricing system, making them eligible for this credit.
Not eligible:
Many farmers are surprised to learn that only incorporated businesses qualify. If your farm is not incorporated, or if your expenses are below the threshold, you will not be able to claim this credit.
There is no fixed dollar amount for this credit. The amount depends on:
The rate can change each year. Your final credit is calculated when you file your corporate return. If you operate in more than one designated province, only the portion of expenses tied to those provinces is used in the calculation.
You claim the fuel charge proceeds tax credit when filing your T2 Corporation Income Tax Return. There is no separate application.
Steps:
Your accountant or tax preparer can usually handle this as part of your annual corporate filing. If you want to explore other agriculture-related tax credits or grants, GrantHub’s eligibility matcher can help you filter programs by province and sector.
Assuming unincorporated farms qualify
This credit is only for incorporated farming businesses. Sole proprietors are not eligible.
Missing the $25,000 expense threshold
Your gross eligible farming expenses must be at least $25,000 for the tax year.
Claiming expenses from non-designated provinces
Only expenses from Ontario, Manitoba, Saskatchewan, or Alberta count.
Not tracking expenses by province
If you do not keep clear records, the CRA may delay or reduce your credit.
Q: Is the fuel charge proceeds tax credit a grant or a rebate?
No. It is a refundable federal tax credit claimed through your corporate income tax return.
Q: Can I get the credit if my corporation has no tax payable?
Yes. Because it is refundable, you can receive a payment even if you owe no income tax.
Q: Which provinces are eligible for the credit?
Ontario, Manitoba, Saskatchewan, and Alberta are the designated provinces.
Q: How often can I claim the fuel charge proceeds tax credit?
You can claim it each tax year as part of your T2 return if you continue to meet the requirements.
Q: Is the credit considered taxable income?
Refundable tax credits affect your overall tax calculation. Your accountant can confirm how it is reported for your corporation.
The fuel charge proceeds tax credit is just one federal support available to Canadian farmers. Review your eligibility for other provincial and federal programs to make sure your business benefits from all available funding. GrantHub tracks hundreds of active grant and tax credit programs—explore which ones match your farm’s needs.
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