You have a farm loss if your farming business expenses for the year are more than your farming income. Before calculating your net farm loss for the year, you may need to apply an optional or mandatory inventory adjustment to the loss. You’ll have the chance to apply these adjustments in TurboTax after entering your farming income and expenses.
Deducting farm losses
Full-time farmers running a business have no limit on the amount of losses they can deduct. If farming isn’t your main source of income, you may only be able to deduct part of your net farm loss for the year. The part of the loss that you can’t deduct is called a restricted farm loss (RFL).
You can’t deduct any of your net farm loss if your farm wasn’t run as a business.
Farm losses, including the allowable portion of a farm loss when farming isn’t your main source of income, can be deducted from all your sources of income in the year of the loss.
An unabsorbed farm loss from a tax year ending after 2005 becomes a non-capital loss that can be deducted against income from:
- A prior year, up to three years back (carryback)
- A later year, up to 20 years forward (carryforward)
RFLs can also be carried forward or back this way, but for deduction only against farming income.
For more information on farming losses, visit the CRA’s Self-employed Business, Professional, Commission, Farming, and Fishing Income page.
TurboTax Online instructions
To report a farm loss or restricted farm loss in TurboTax Online, follow these steps:
- Select Find from the menu.
- In the Find window, enter farm.
- Select Farming Activities from the results, then select Go.
- At What category is your self-employment work? select Farming, then Continue.
- Depending on your province, you may arrive at the AgriStability and AgriInvest Participant screen. Answer Yes or No to the question.
- If you selected Yes:
- At AgriStability and AgriInvest Account Information, enter your details and then select Continue.
- At AgriStability and AgriInvest Farming Identification screen, provide the required information.
- At AgriStability and AgriInvest Farming Profile, check the boxes for Income and Expenses (and any other applicable boxes, such as Mandatory or optional inventory adjustment), then select Continue.
- At AgriStability and AgriInvest Farming Income provide the income details.
- At AgriStability and AgriInvest Farming Expenses provide the expense details.
- At Reconciliation of 202x AgriStability and AgriInvest Farming Income answer the questions.
- At Your Self-Employment or Business Summary review the summary and select either Enter New Business or Done With Businesses as applicable.
- If you selected No, or if the AgriStability and AgriInvest Participant screen doesn't appear for you:
- Enter your farm details on the screens that follow, selecting Continue as you finish each screen.
- On the Let's look at your farming income and expenses screen, check the boxes for Income and Expenses (and any other applicable boxes, such as Mandatory or optional inventory adjustment), then select Continue.
- Enter your farming income and expenses on the screens that follow.
- At Your Self-Employment or Business Summary, answer Yes or No to Is your net farming income (loss) a restricted farm loss?
- Select either Enter New Business or Done With Businesses as applicable.
- If you selected Yes:
TurboTax Download instructions
To report a farm loss or restricted farm loss in TurboTax CD/Download, follow these steps:
- Select Find from the menu.
- In the Find window, enter farm.
- Select Farming Income from the results, then select Go.
- Depending on your province, you may arrive at the AgriStability and AgriInvest Participant screen. Answer Yes or No to the question.
- If you select Yes:
- Enter your farm details on the screens that follow, including your farming income, expenses, and inventory adjustments (if applicable). Select Continue as you finish each screen.
- At AgriStability and AgriInvest summary, answer Yes or No to Is your net farming income (loss) a restricted farm loss?
- Select Done With AgriStability and AgriInvest Income.
- If you select No, or if the AgriStability and AgriInvest Participant screen doesn’t appear for you:
- At T2042 Farming Identification Statement, provide the required information, select Continue.
- At T2042 Farming Profile, check the appropriate boxes, then select Continue.
- At T2042 Farming Income enter your farming income in the appropriate categories, select More Income if applicable or select Done Income.
- At T2042 Farming Expenses enter your farming expenses in the appropriate categories, select More Expenses if applicable or select Done Income.
- At Do you need to reconcile your farming income? select Yes (and do the reconciliation) or No.
- At T2042 farming summary - Is your net farming income (loss) a restricted farm loss? select Yes or No.
- Select Done With Farming Income.
- If you select Yes:
