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.