Statement of farming activities (T2042)

• GST Account number: Enter the 15-digit GST account number that has been assigned to you by the CRA.
  
  
• [QC]QST Account number: Enter the 15-digit QST account number that has been assigned to you by Revenu Québec.
  
  
• Accounting method: You can report your farming income using the cash method or the accrual method of accounting.

  The accrual method is one where you report your income or expenses in the fiscal period (also known as business year) to which they apply, regardless of when you receive the income or paid the expenses. Generally, this is the method most commonly followed by self-employed individuals.

  Using the cash method, you report income in the fiscal period you received it and deduct expenses in the fiscal period you paid them. Click this link for more information on both methods of accounting.

  
  
• Your fiscal period (Date your fiscal period started/ended)*: Typically, this is a period of 12 months, and covers the time from the day your business starts its year to the day it ends its year. A fiscal period can’t be longer than 12 months but can be shorter in the year you start your business or end it.
  
  
• Industry code*: You must enter an industry code that describes your main farming activity. If your farming operation involves more than one type of farming activity, and none of them represents at least 50% of your farming business, choose the combination farming code that most closely describes your farming activities. Click here for a full list of industry codes.

  Alternatively, in the search box on the form, enter the keywords that describe your farming activity to find the related farming code.
  
  

• Tax shelter identification number: If you have a tax shelter associated with your farm or farming activities, enter your tax shelter identification number in this field.
  
  

Your business has income from webpages or websites if you sell goods or services through any of the following channels:

• your business’ own webpage or website
• through auction, market place, or similar sites operated by others
• from advertising or traffic your site generates

If you don't have a website but you’ve created a profile or other page describing your business on blogs, auction, market place, or any other portal or directory sites that generate income, include this amount in your percentage calculation. If you’re unsure of the exact percentage, enter an estimate.

In the Income section, enter the total amount(s) you received for the sale of your products (such as wheat, potatoes, barley, oats, etc.), in Canadian dollars, into the appropriate fields.

• Other crops – Enter the total income you received from the sale of pulse crops, sugar beets, hops, or any other crop that you haven’t yet reported on your return.
  
  
• Greenhouse and nursery products – Enter the total income you received from the sale of ornamental plants, shrubs, trees, cut and field-grown flowers, rooted cuttings, seeds and bulbs, sod and turf, and greenhouse vegetables.
  
  
• Forage crops or seeds – Enter the total income you received from the sale of hay, alfalfa, clover and clover seed, alsike, timothy, fescue, grass seed, or any other forage crops or seeds.

Enter the total amount(s) you received for the sale of your livestock (such as cattle, swine, poultry, etc.), in Canadian dollars, into the appropriate fields.

• Livestock and animal products revenue – Enter the total amount of income you received for the sale of any other livestock not specifically identified in one of the previous fields of the T2042 page. This can include amounts from the sale of fur-bearing animals you raised in captivity such as fox, chinchilla, mink, or rabbit, as well as income earned from an apiary (beekeeping) operation.
  
  
• Milk and cream – Enter the total amount of income you received from the sale of milk or cream. Be sure that you don’t include any dairy subsidies you may have received in this field; you can enter this amount under the Program payments section.
  
  
• Other commodities – Enter the total amount of income you received from the sale of commodities that you have not previously entered on this page. Other commodities can include any of the following:
  • Semen
  • Stud services
  • Embryo transplants
  • Artificial insemination
  • Pregnant mare urine
  • Maple syrup products
  • Mushrooms
  • Ginseng

In this section, enter the amounts you’ve received under each program.

• Crop insurance – Enter the total amount of insurance proceeds you received from federal, provincial, or joint federal/provincial programs as a result of losing your crops.
  
  
• Other program payments – Enter the total amount of income you received from all other stabilization and farm-subsidy programs under federal, provincial, or joint federal/provincial programs. Applicable disaster assistance programs include the following:
  • The Agriculture Income Disaster Assistance (AIDA) Program
  • The Canadian Farm Income Program (CFIP)
  • The Whole Farm Insurance Pilot (WFIP)
  • The Farm Income Disaster Program (FIDP)
  • The Ontario Whole Farm Relief Program (OWFRP) and the Ontario Farm Income Disaster Program (OFIDP)

You’ll also have to enter any payments that you may have received under the Health of Animals Act, if you had to destroy any animals. Refer to the CRA’s Farming Income Guide for more details.

• Rebates – Enter the total amount you received as a rebate, grant, or credit to buy depreciable property (for example, a car). Before including this amount as income, be sure to reduce any related expense of the capital cost of a related depreciable asset by the amount of the rebate, grant, or credit.
  
  
• Insurance proceeds – Enter the amount you received as compensation for loss or damage to certain types of property used in your farming business. For example, you might have received insurance proceeds for damage to a building caused by a fire, or for the loss of livestock to disease.

  Insurance proceeds that you received to replace lost or destroyed depreciable property are considered to be proceeds of disposition for that property and as such, will also need to be reported on the Capital cost allowance (CCA) section.

  If you didn’t use all of the proceeds to make repairs, or if you didn’t make repairs in a reasonable time, the CRA will consider the amounts you received to be proceeds of a disposition, which you’ll have to report in theCapital cost allowance (CCA) section.

• Containers and twine – Enter the total amount you paid for materials to package, contain, or ship your farm produce or products. If you operated a nursery or a greenhouse, deduct the cost of your containers and pots for the plants you sold.
  
  
• Fertilizers and lime – Enter the total amount you paid for fertilizers and lime you used in your farming business.
  
  
• Pesticides (herbicides, insecticides, fungicides) – Enter the total amount you paid for herbicides, insecticides, and fungicides you used in your farming business.
  
  
• Seeds and plants – Enter the total amount you for seeds and plants. Don’t include the cost of seeds and plants you used in your personal vegetable or flower garden.
  
  
• Feed, supplements, straw, and bedding – Enter the total amount you paid for feed, supplements, straw, and bedding that you purchased for your farming business. Note that you cannot deduct the value of the feed, straw, or bedding that you grew.
  
  
• Livestock purchases – Enter the amount you paid for all the livestock you purchased.
  
  
• Veterinary fees, medicine, and breeding fees – Enter the total amount you paid for medicine for your animals, and for veterinary and breeding fees. Examples of these types of fees can include any of the following:
  • The cost of artificial insemination
  • Stud service and semen
  • Embryo transplants
  • Disease testing and
  • Neutering and spaying

• Repairs, licence fees, and insurance – Enter the total amount of repair, licence fee, and insurance premium expenses you paid for your machinery. If you received any insurance proceeds, either as compensation for loss or damage to your property, enter it in the appropriate field of the Program payments section.
  
  
• Gasoline, diesel fuel, and oil – Enter the total amount you paid for fuel and lubricants for your machinery. If you used a personal vehicle for business purposes, don’t enter that amount here; instead, enter it on the Motor Vehicle Expenses field.
  
  
• Building repairs and maintenance (includes fence repairs) - You can deduct the repair costs to fences and all buildings on your property, except your farmhouse. When calculating this expense, be sure to exclude the value of your own labour.
  
  

Note: If you made improvements to a fence or building beyond its original condition, you must add the value of the expense to the cost of the asset when calculating your capital cost allowance (CCA).

• Clearing and leveling or draining of the farm land – In most cases, you can deduct the costs for:
  • Clearing the land of brush, trees, roots, stones, etc.
  • The first plowing of the land for farm use
  • Building an unpaved road
  • Installing a land drainage system

Note: If the land on which your farming activities are taking place is rented, you will not be able to deduct these costs. Click here for more information.

• Crop insurance – Enter the amount of deductible premiums you paid to the Crop Insurance Program.
  
  
• Custom or contract work (includes machine rentals)– Enter the total income amount you received for performing any of the following tasks:
  • Custom or contract work
  • Hauling
  • Custom trucking
  • Harvesting
  • Combining
  • Crop dusting or spraying
  • Seeding
  • Drying
  • Packing
  • Cleaning
  • Treating seeds
  • Renting farm machinery
  
  
• Electricity – Enter the total amount you paid for electricity costs relating to your farming business.
  

Note: You can only deduct the portion of these costs that relate to your farming business. Generally speaking, your home’s electricity expense is a personal expense, and therefore can’t be deducted unless you meet the conditions for business-use-of-home expenses.

• Heating fuel and curing fuel – Enter the total amount you paid for natural gas, coal, or oil to:
  • Heat farm buildings (including greenhouses)
  • Cure tobacco
  • Dry your crops

Note: You can only deduct the portion of these costs that relate to your farming business. Generally speaking, heating your home is a personal expense, and therefore can’t be deducted unless you meet the conditions for business-use-of-home expenses.

• Insurance program overpayment recapture – Enter the amount of any insurance program overpayment recapture you incurred. This amount will be shown in box 17 of an AGR-1 Statement of Farm-Support Payments.
  
  
• Insurance – Enter the amount of business-related insurance premiums you paid to insure things like farm buildings, farm equipment (excluding machinery and motor vehicles), livestock, and business interruption.

In most cases, you can’t deduct the amounts you paid to insure personal property such as your home or car. However, if you used the personal property for your farming business, you’ll be able to deduct the business portion of these costs in the Business use of home expenses section or the Motor Vehicle Expenses field.

• Professional fees (includes legal and accounting fees) - You can deduct the fees you had for external professional advice or services, including consulting, accounting, and legal fees.
  
  
• Salaries, wages, and benefits - You can deduct gross salaries, wages, and other benefits you paid to employees, including the employer’s contributions. Don’t include in this field salaries or drawings you paid or payable to yourself or to a partner; instead enter these amounts in the Details of equity section.
  
  
• Property taxes – Enter the amount of land, municipal, and realty taxes you paid for property used in your farming business. Since the municipal tax you paid on your farmhouse is a personal expense, you won’t be able to deduct it unless you meet the conditions for business-use-of-home expenses.
  
  
• Interest – You can deduct the interest you paid on money that you borrowed for farming business purposes or to purchase property for your farming business.

You might also be able to deduct interest expenses on property you used in your farming business even if you are no longer in the farming business and no longer use the property to earn farming income. For more information, contact the CRA at 1-800-959-5525.

• Small tools – Enter the total amount you paid for small tools (cost less than $500) for use in your farming business.
  
  
• Mandatory inventory adjustment included in 2022 – You can deduct the mandatory inventory adjustment amount reported on your 2022 return as an expense on this year’s return. Do not include the valuation of inventory if you are using the accrual method for reporting your income.

A mandatory inventory adjustment (MIA) decreases your net loss if you held inventory at the end of your fiscal period. You’ll have to make a MIA if each of the following conditions are met:

• you use the cash method to report your income
• you’re reporting a net loss on form T2042
• you purchased inventory and you still have it at the end of your fiscal period. Note that this does not just refer to inventory purchased in the year; it includes inventory that you previously bought and still held at the end of your fiscal period.

For more information, refer to lines 9941 and 9942 of the CRA’s Farming Income Guide.

• Optional inventory adjustment included in 2022 – You can deduct the optional inventory adjustment amount reported on your 2022 return as an expense on this year’s return. Do not include the valuation of inventory if you are using the accrual method for reporting your income.

An optional inventory adjustment (OIA) allows you to include, in your income, an amount up to the fair market value of your inventory minus the mandatory inventory adjustment (MIA) (see above). Unlike the MIA, when determining your OIA, the inventory does not have to be inventory that you bought; it includes your entire inventory at the end of your fiscal period.

• Enter the total amount you paid for each expense - You'll confirm how much of these expenses were for personal use in the Amount of the above expenses that was only for personal use field. You can deduct a portion of the following expenses for the business use of a workspace in your home, provided that your home is your principal place of business or you use the workspace only to earn your farming business income on a regular and ongoing basis:
  • Heat
  • Electricity
  • Insurance
  • Maintenance
  • Mortgage interest
  • Property taxes
  • Other home office expenses

  To calculate the portion you can deduct, take the area of your workspace and divide it by the total area of your home.

  If you use your home for business and personal purposes, you can use the following formula to calculate the amount you can deduct:

  (Hours in the day you used the area for business ÷ 24 hours) X Business portion of your total home expenses

• Amount of above expenses that was only for personal use - To calculate the portion you can deduct, take the area of your workspace and divide it by the total area of your home. Subtract this amount from 100 to obtain the percentage of your home that is for personal use only.

Let’s say for example, that you run a farming business from home. The workspace you use for your farming business is 200 square feet and the total area of the home is 1000 square feet. Use the following formula to calculate the percentage of your home you use for business purposes.

200 square feet X 1,000 square feet = 20% --- area used for business purposes

100

100% - 20% = 80% --- area of the home used for personal use only

Therefore, 80% of your home’s costs for heat, electricity, insurance, maintenance, etc. were for personal use only. Enter 80% in this field on the T2042 page.

• Amount carried forward from previous year – You might not have used all your home office expenses last year to reduce your income tax payable. Your unused expenses amount can be found in the Calculating business-use-of-the-home expenses section of your last year’s T2042 form.

If you use a motor vehicle for business and personal use, you can deduct only the part of the expenses you paid to earn income. Farming business use includes trips to pick up parts for machinery or farming supplies, and to deliver grain. If you do not live on your farm, you cannot claim expenses incurred for travelling between your home and your farm.

The type of motor vehicle expenses you can claim include:

• Kilometres driven
• Licence and registration fees
• Fuel costs
• Insurance
• Interest on money borrowed to buy a motor vehicle
• Electricity for zero-emission vehicles
• Maintenance and repairs
• Leasing costs

You can also claim capital cost allowance (CCA) for your motor vehicle but you enter this amount on the CCA page of the form.

Tip: Remember to keep a detailed logbook of the kilometres driven for each business trip and receipts to support your claim.

You can’t deduct the cost of property such as furniture, equipment, or a building in the year of purchase. However, as such property wears out over time, you can deduct a portion of its cost each year (generally for as long as you own the property). This deduction is called capital cost allowance (CCA).

• Choose the class for your depreciable property – Enter the CCA class number to which your property belongs. A specific rate of CCA applies to each class and will help in calculating the CCA you can claim. For example, self-propelled combines fall under Class 10 which has a CCA rate of 30%. Click here for a full list of CCA classes and their rates.

Note:

• You can usually claim CCA on only half of your net additions to a class in the year you bought the depreciable property. This is known as the half-year rule.
  
  
• If your asset is a building, the CCA rate is 4%. If you bought a building in Canada after March 18, 2007 that you use for business purposes, you might qualify for an additional allowance, increasing your CCA rate to 10%. To be eligible, you need to use at least 90% of the building for your business. Manufacturing and processing buildings that don’t meet the 90% requirement, will be eligible for an additional 2% allowance (increasing your CCA rate to 6%), if at least 90% of the building is used for non-residential purposes at the end of 2023.

• If you disposed of a property in this class in your 2023 fiscal period, what were your proceeds of disposition? Enter the lowest amount: the amount you received for the property or the capital cost – When completing the T2042 page, you’ll need to calculate this amount for each piece of depreciable property of the same class that you are disposing of and enter it in this field. If you disposed of a depreciable property of another class, click Add another class and repeat the process outlined above.

• Total business liabilities – These are amounts your business owes at the end of its fiscal period, such as accounts payable, unpaid salaries, or loans.
  
  
• Drawings in 2023 – This is the total amount you withdrew from your business such as cash, assets, or services from the business used for personal use, including your salary.
  
  
• Capital contributions in 2023 – These are personal cash or other assets you added to the business to pay for expenses or a debt.
  
  
• Have you sold or disposed of all your assets in this class? – If your answer to this question is Yes, you might be eligible to claim a terminal loss. Click here for more information on terminal losses.

• Total cost of all land additions in 2023 – Enter the total cost you paid to buy land in the year.
  
  
• Total proceeds from all land dispositions in 2023 – Generally, this is the selling price of the land. However, it can also include payment received for expropriated, destroyed, or damaged/stolen property.

• Total cost of all quotas additions in 2023 – Quotas (like milk and egg quotas) are property that you can purchase that doesn’t exist, at least in the physical sense. This kind of property is considered to be eligible capital property. Amount paid for this type of property can be claimed as an eligible capital expenditure.
  
  
• Total proceeds from all quota dispositions in 2023 – Enter the amount received from the sale of all quotas in 2023.