Farming Income and the AgriStability and AgriInvest Programs Guide – Chapter 3 – Calculating your farming income or loss

These sections of the form are used to calculate your allowable net sales for AgriInvest. Allowable net sales are allowable commodity sales and program payments, less allowable purchases. For more information on allowable net sales and how we calculate benefits under AgriInvest, see the AgriInvest Program Handbook or go to AgriInvest.

We also use these sections to calculate the cash portion of your program year margin for AgriStability. For more information on how we calculate AgriStability margins, contact your provincial Administration at one of the numbers.

Complete Form T1163 for your main farming operation. If you have more than one farming operation, use Form T1164 for each additional operation. Instructions in this chapter apply to both forms.

To make sure you report your information correctly for AgriStability and AgriInvest, read the following instructions carefully.

Commodity and Program payment code lists

Use the Commodity list and Program payment code list A and Program payment code list B to report all income and expenses on Form T1163 or T1164. Codes may change from year to year. Check the lists to make sure you use the right code.

If you use the accrual method of accounting, report all your sales and your changes in opening and closing commodity inventories separately using the code for the commodity to report both entries.

Income

An agricultural commodity is a plant or an animal produced in a farming business.

Some commodities that may be considered farming income for income tax purposes are not allowable for AgriStability and AgriInvest including:

• aquaculture
• trees and seedlings sold for use in reforestation
• wood sales
• peat moss
• wild game reserves
• cannabis (except for industrial hemp)

Where permitted by law, hunt farms (not wild game reserves) are eligible. For information on how to apply if you operate a hunt farm, contact your Administration.

If you do not produce any allowable commodities on your farm, use Form T2042 to report your farming income from non-allowable commodities to the CRA.

If you produce both allowable and non-allowable commodities on your farm, report the income from:

• Non-allowable commodities on line 9600, except for woodlots or cannabis (excluding industrial hemp). Report woodlot sales using code 259 and cannabis using code 382.
• Allowable commodities on the "Commodity sales and program payments" section of the form. Use the commodity list. Report allowable commodity sales based on the point of sale conditions.

Sales and purchases of supply managed commodities are not allowable for AgriInvest. You must produce allowable commodities in addition to your supply managed commodities to participate in AgriInvest. Enter both your supply managed and non-supply managed commodities on the "Commodity sales and program payments" section of the form. Use the commodity list.

If you have questions about whether a commodity you produce is allowable for AgriInvest, contact the federal Administration at 1-866-367-8506. For AgriStability, contact your provincial Administration.

Farming activities outside Canada

If you produce a commodity in Canada, then ship it outside of the country for further production, the income and expenses generated once the commodity leaves Canada are non-allowable for AgriStability and AgriInvest.

When shipping commodities outside Canada for further production, include the fair market value (FMV) of the commodity at the point it leaves Canada as allowable income using the code for the commodity.

If the commodity is returned to Canada for further production or sale, include the FMV of the commodity at the point it enters Canada as an allowable purchase using the code for the commodity.

If you purchase livestock, you must have made an appreciable contribution to the growth or its increase in value in Canada for the income and expenses to be considered allowable.

Point of sale

AgriInvest benefits are based on allowable net sales, so you have to determine when the sale occurs. For AgriInvest, the point of sale for your allowable commodity is determined by the following conditions:

• you produce it on your farm
• it is separate and identifiable from other producers' commodities
• you bear full risk for it
• you have a separate billing or accounting transaction that shows the sale value and any deductions from that value

The point of sale is when you:

• can no longer identify your commodity as your own
• are no longer at risk for the value of the commodity

If your commodity sales meet these point of sale conditions, fill in the code, name, and gross sale amount of each commodity on the form.

If you received a cheque for a commodity sale that is net of expenses, report the sale to include the full value of the commodity.

Line 575 – Point of sale adjustments

If your commodity sales include charges that were applied after the point of sale, adjust your sales to show the value of the commodity at the point of sale. Enter any amounts charged after the point of sale on "Line 575 – Point of sale adjustments." This will ensure that we calculate your allowable net sales correctly.

Payment in kind

A payment in kind occurs when you receive or give goods or services instead of money. For instance, to pay someone for a business expense, you may give them something you produced on your farm instead of money. When you do this, include the FMV of the goods or services in income. Use the appropriate code for the commodity. Enter the same amount as an expense.

If you received a payment in kind for a product you would normally have sold, include the FMV of the product in income.

If you were a landlord renting out land involved in sharecropping, we consider any payment in kind you received to be rental income.

Gifts

In your income, include the FMV of livestock or other items you gave that you would normally have sold.

Once you give the livestock or other items away, you cannot deduct any more costs for raising or maintaining them.

Crop share

If you are a tenant in a crop share, you are eligible to apply for AgriStability and AgriInvest.

If you are a landlord in a crop share, you are eligible for AgriStability and AgriInvest only if the crop share arrangement is considered a joint venture.

For AgriStability, your crop share arrangement is considered a joint venture if your share of the allowable expenses reported to the CRA is reasonable for your share of the allowable income.

For AgriInvest, your crop share arrangement is considered a joint venture if your share of allowable purchases reported to the CRA is reasonable for your share of the allowable income.

Eligible tenants and landlords report only their individual share of the allowable income and expenses.

Commodity futures

You can report income from commodity futures as a commodity sale for AgriStability and AgriInvest purposes if the income is both:

• from a primary agricultural product that you produced on your farm
• considered a hedging strategy

Report commodity futures as follows:

• for the gross amount, enter the income as a commodity sale using the code for that commodity. Report related purchases as a commodity purchase using the code for that commodity.
• for the net amount, enter the net gain as a commodity sale using the code for that commodity. Report the net loss as a commodity purchase using the code for that commodity.

Report income from futures transactions involving commodities that you did not produce or that were not considered a hedging strategy as other farming income on line 9600. Enter losses as a non-allowable expense on line 9896.

Grains, oilseeds, and special crops

If you sold grain directly or through an agency, include in income all the amounts you received from these sales.

Storage and cash purchase tickets

When you delivered grain to a licensed public elevator or process elevator, you received a storage ticket, a cash purchase ticket, or a deferred cash purchase ticket.

If you received a storage ticket, a sale did not take place. Therefore, you do not have to include that amount in income.

However, if you received a cash purchase ticket, a sale did take place. Since we consider that you received a payment at the time you received the ticket, you must include the amount in income.

If you received a deferred cash purchase ticket, you may be able to defer the income until a later fiscal period. You can do this if the ticket provides for payment after the end of the year in which you delivered the grain. This carryover of income is only allowable in specific situations. For more information, see Interpretation Bulletin IT-184, Deferred cash purchase tickets issued for grain.

Cash advances

Under the Agricultural Marketing Programs Act, you may be able to get advances for crops that someone stores in your name. We consider these advances to be loans. Do not include these payments in your income if you have not sold the crops. Include the full amount from the sale of your crops in your income for the tax year in which the sale occurs.

Tree production

Allowable tree production

Trees must be produced through farming activity to be allowable for AgriStability and AgriInvest. Farming activity for trees includes:

• planting
• nurturing
• harvesting

Operations must:

• pay significant attention to managing the growth, health, and quality of the trees
• generate normal input and harvesting costs

Allowable tree production includes regular seeding and harvesting of:

• trees
• shrubs
• herbaceous perennials
• annuals, including ornamental, fruit, and Christmas trees

Report income, expenses, and inventory of allowable tree production using the code for the commodity.

Non-allowable tree production

Trees produced or harvested for the following reasons are non-allowable for AgriStability and AgriInvest:

• firewood
• construction material
• poles or posts
• fibre, pulp and paper
• trees and seedlings destined for use in reforestation

Enter income from these non-allowable items on Line 9600 – Other (specify).

Wood sales (including stumpage)

If you operated or regularly harvested a woodlot, use commodity code 259 to report the sale of trees, lumber, logs, poles, or firewood in your income. This income is non-allowable for AgriStability and AgriInvest.

From this income, you can deduct a type of capital cost allowance known as a depletion allowance. For more information, see Interpretation Bulletin IT-481, Timber Resource Property and Timber Limits.

If you earned the income by letting other people remove standing timber from your woodlot, the proceeds may be a capital receipt. A taxable capital gain or an allowable capital loss may result. For more information on capital gains and losses, see Chapter 6 and Guide T4037, Capital Gains.

For more information on the sale of wood, see Income Tax Folio S4-F11-C1, Meaning of Farming and Farming Business.

Livestock

Include insurance payments you received for loss of livestock in the commodity sales column using the livestock commodity code.

Custom feedlot operators

For AgriStability, income and expenses may be allowable if you:

• grew (or purchased) the feed used in your custom feeding operation
• made an appreciable contribution to the growth and maturity of the livestock

For AgriInvest, income you earned from custom feeding is allowable based on the value of allowable commodities you grew (or purchased) and fed to custom fed livestock.

If your custom feeding invoices are itemized, enter:

• allowable feed and protein supplements as a prepared feed sale under "Commodity sales and program payments" using code 243
• other itemized charges under "Commodity sales and program payments" using code 576

If your custom feeding invoices are not itemized, enter:

• the amount invoiced as a prepared feed sale under "Commodity sales and program payments" using code 246. We will use 70% of this amount to calculate your allowable net sales.

PMU contract cancellation income

Income you received from the buy-out of pregnant mare urine (PMU) contracts is allowable if paid in lieu of the income you would have received for the sale of the product under the contract. Penalty fees and other compensation are non-allowable.

Use code 322 to report amounts you received for your Collection Agreement, Herd and Health payments, West Nile Reimbursement, and Equine Placement Fund.

Use Line 9600 – Other (specify) to report amounts you received for Business Planning Subsidy and capital costs.

Canadian Food Inspection Agency (CFIA) – Destroying livestock

You have to include in income any payments you received under the Health of Animals Act for destroying animals.

Use the CFIA program payment codes to report CFIA payments you received. For more information on how to report your CFIA payments, see Income from program payments.

You can choose to deduct all or part of the payment as an expense in the year. However, if you choose to do this, you have to include in your income for your next fiscal period the amount you deduct in your 2023 fiscal period. If you deferred payments in your 2022 fiscal period, you have to include the deferred amounts as income in your 2023 fiscal period. Use the codes found in the PDR/PFR/CFIA deferred livestock codes to report these amounts.

Prescribed drought region (PDR) and Prescribed flood region (PFR)

The Livestock Tax Deferral provision allows you to sell part of your breeding herd due to drought or flooding in a prescribed drought or flood area. You would be permitted to defer a portion of your sales proceeds to the following fiscal period or a later year if the condition persists and your region is still a prescribed region.

To be able to do this, you must meet the following two conditions:

• your farming business was located in a PDR or PFR at some time during your 2023 fiscal period
• you reduced, by sale or other means, the number of breeding animals in your breeding herds by at least 15%

For a list of the prescribed regions of drought, flood or excessive moisture, contact the CRA or Agriculture and Agri-Food Canada or go to Weather and drought related to agriculture or Livestock Tax Deferral Provision.

Income deferral

The following animals kept for breeding that are over 12 months of age are considered breeding animals eligible for the income deferral:

• bovine cattle
• bison
• goats
• sheep
• deer, elk, and other similar grazing ungulates
• horses you breed to produce pregnant mare's urine that you sell

Eligibility for the income deferral includes:

• all horses over 12 months of age kept for breeding
• breeding bees not used mainly to pollinate plants in greenhouses and larvae of such bees. For the purposes of the income deferral rule, breeding bee stock is defined as follows:
  • at any time, a reasonable estimate of the quantity of your breeding bees held at that time in the course of carrying on a farming business using a unit of measurement that is accepted as an industry standard

The unit of measurement at the end of the year is the same as that used for the beginning of the year. A formula is used to calculate what you can defer for breeding bees.

To determine the size of your breeding herd at the end of your 2023 fiscal period, fill in the following chart.

Before you determine how much you can defer, you need to calculate a few amounts. First, determine your sales of breeding animals for your 2023 fiscal period minus any reserves you claimed for these sales.

A reserve is created when you sell property and do not receive the full proceeds at the time of the sale. Instead, the amount of proceeds is spread over a number of years, which allows you to defer reporting these proceeds to the year in which you receive them. For more information on reserves, see Interpretation Bulletin IT-154, Special Reserves.

When you have determined your sales of breeding animals, subtract from this amount the cost of breeding animals you bought in your 2023 fiscal period. The result is your net sales amount.

You then determine how much you can defer as follows:

• if the amount at line 9 is more than 70% and not more than 85% of your breeding herd at the end of your 2022 fiscal period, you can defer up to 30% of your net sales amount
• if the amount at line 9 is between 0% and 70% of your breeding herd at the end of your 2022 fiscal period, you can defer up to 90% of your net sales amount

You do not have to defer all of this income. You can include any part of it in your 2023 income. However, the deferred income must be reported in the fiscal period that ends in either:

• the year beginning after the period or periods when the region stops being a PDR or PFR
• the year when the farmer dies
• the first year when, at the end of that year, the farmer is a non-resident and has ceased to carry on business through a fixed place of business in Canada

If you want, you can elect to report the deferred income in the year after you deferred it.

Report the income you received from the sale of breeding animals as a commodity sale using the commodity code (see Commodity list). Report the amount you are deferring as a purchase using one of the deferred livestock codes listed below.

In the year that you must report the deferred income, report it under commodity sales using the same deferred livestock code you used before.

If your farming business was not in a PDR or PFR at any time during your 2023 fiscal period, you cannot defer the amount you received when you sold breeding animals. Also, you must include in your 2023 income any unreported amounts you deferred in earlier years.

However, as long as your farming business was in a PDR or PFR at any time in your 2023 fiscal period, you do not have to include income you deferred in earlier years.

Income earned from the use of commodities

Include income earned from the use of commodities with commodity sales, except for pollination services. For example, report income from stud fees with horse sales. However, enter income earned from pollination services using code 376.

Income from program payments

Use the codes found in the Program payment list A or B to report your program payment. Using the correct code helps us calculate your benefits accurately and prevents processing delays.

Enter the program payment code, name, and amount under "Commodity sales and program payments."

If you recorded program payments net of expenses in your books (for example, income minus expenses), report the full amount of the payment as income and the deductions as an expense.

You should receive an AGR-1 slip, Statement of Farm-Support Payments, identifying all 2023 taxable farm-support program payments from which you received more than $100. These include farm-support programs administered by the federal, provincial, territorial, and municipal governments, and by producer associations.

You have to include in income all taxable farm-support payments you received in your 2023 fiscal period, including amounts of $100 or less.

If your farm is operated as a partnership, only one partner should attach the AGR-1 slip to his or her income tax return. However, if your partnership has to file a partnership information return, you should file the AGR-1 slip with that return.

If the annual period of the AGR-1 slip is not the same as the fiscal period of your farming operation, report only the part of the farm-support payments you earned during your normal fiscal period. For example, if your farming business has a fiscal period ending on June 30, 2023, and your AGR-1 slip shows income of $10,000 in box 14, but you earned only $6,000 of that income by June 30, 2023, include only $6,000 in your income for your 2023 fiscal period. Include the remaining $4,000 in your next fiscal period. However, include the AGR-1 slip issued for the 2023 calendar year with your 2023 income tax return or partnership information return.

The back of the AGR-1 slip contains information about how to report amounts that appear in the various boxes.

Canadian Food Inspection Agency (CFIA) payments

Enter the portion of CFIA payments you received for:

• The loss of an allowable commodity using code 663, "CFIA payment for allowable commodities."
• The loss of a commodity that is non-allowable for AgriStability or AgriInvest using code 587, "CFIA payments – Compensation for non-allowable commodities." For example, a payment you received for the loss of trees destined for use in reforestation.
• The loss of a supply managed commodity using code 664, "CFIA payment for supply managed commodities."
• Costs not directly related to a commodity loss using code 665, "CFIA payment for other amounts." For example, a payment you received for the cost of carcass disposal.

COVID-19 program payments

Livestock set aside program

Mandatory isolation support for temporary foreign workers program

Canada Emergency Wage Subsidy

Temporary 10% wage subsidy

Private insurance proceeds

For AgriStability, private insurance proceeds for price, revenue, production or margin loss are non-allowable in the program year if they are fully producer funded. For AgriInvest, these proceeds are included in the allowable net sales calculation. Private insurance proceeds include Global Ag Risk Solutions (GARS) payments.

• code 407 for private hail insurance payments
• code 661 for payments you received for revenue losses for allowable commodities (production/price/margin insurance)
• code 667 for livestock price insurance payments

Private insurance proceeds to replace allowable commodities or allowable expense items

• Use code 681 for payments to replace allowable commodities, such as seed or feed.
• Use code 406 for payments to replace allowable expense items, such as fertilizer, chemicals, fuel or twine.

Report private insurance proceeds received for different types of compensation according to the invoice from your insurer.

Payments from the AgriStability and AgriInvest programs

Do not report any government contributions you have withdrawn from Fund 2 of your AgriInvest account on this form.

Payments you receive from AgriStability (shown in box 14 of your AGR-1) are considered farming income. Enter these payments on Line 9544 – Business risk management (BRM) and disaster assistance program payments.

If you received an AGR-1 slip with a negative amount in box 14, enter this amount on Line 9896 – Other (specify). You could have a negative amount if you were in an overpayment in one year and repaid the money the following year.

Other farming income

The instructions for completing "Other farming income" apply to Forms T1163 and T1164.

Rental income

Except for leases explained under line 9613, you do not usually include rental income in your farming income. To determine your rental income, use Form T776, Statement of Real Estate Rentals. You will find this form in Guide T4036, Rental Income. Enter the amount of your net rental income on line 12600 of your income tax return.

However, for AgriStability and AgriInvest, landlords are eligible if the crop share arrangement is a joint venture. For more information, see Crop share.

If you were a landlord renting out land involved in sharecropping, we consider the payments you received, whether in kind or cash, to be rental income for tax purposes.

Line 9540 – Other program payments

Include the total income you received from all other stabilization and farm subsidy programs made to farm producers under federal, provincial, municipal, territorial or joint programs that are not listed on Program payment list A or B or under line 9544.

If you received an overpayment from any of these programs, enter the amounts you repaid on Line 9896 – Other (specify).

Do not include AgriInsurance (production/crop insurance) on this line.

Line 9544 – Business risk management (BRM) and disaster assistance program payments

Enter any payments you received from federal or provincial BRM and disaster assistance programs (such as AgriStability, including Interim or Targeted Advance Payments).

If you received an overpayment from any of these programs, enter the amounts you repaid on Line 9896 – Other (specify).

Do not include AgriInsurance (production/crop insurance) on this line.

Line 9574 – Resales, rebates, GST/HST for allowable expenses

Enter the total resales and rebates of allowable expenses, including GST/HST rebates, unless you have already reduced your expenses by these amounts.

Line 9575 – Resales, rebates, GST/HST for non-allowable expenses, and recapture of capital cost allowance (CCA)

Enter the total resales and rebates for non-allowable expenses, including GST/HST rebates, unless you have already reduced your expenses by these amounts.

Recapture of capital cost allowance

Include in your income the amount of any recapture of CCA you have from selling depreciable property such as tools and equipment.

Fill in the "Calculation of capital cost allowance (CCA) claim" chart on Form T1175, Farming – Calculation of Capital Cost Allowance (CCA) and Business-use-of-home Expenses, to find out if you must report any recapture of CCA. For more information, see Chapter 4.

Line 9601 – Agricultural contract work

Enter the total of your incidental farming income from such things as custom or contract work, harvesting, combining, crop dusting or spraying, seeding, drying, packing, cleaning, and treating seeds.

To report income you received from renting farm machinery, see Line 9614 – Machine rentals.

If you are a custom feedlot operator, see Custom feedlot operators for information on reporting your custom feeding income.

Line 9605 – Patronage dividends

Enter your total patronage dividends (other than those for consumer goods or services) that are received by eligible members of agricultural co-operatives on line 9605.

If you receive a patronage dividend in the form of "tax deferred co-operative shares," there is no need to immediately include it in income. Tax may be deferred to the year in which the shares are disposed of or deemed to be disposed of. The balance of the shares could then be carried forward and sheltered until actual or deemed disposition.

The temporary deferral of tax on patronage dividends paid by an agricultural co-operative corporation in the form of eligible shares is extended in respect of eligible shares issued before 2023.

Line 9607 – Interest

Enter the total incidental interest earned on business accounts related to your farming business, not interest on personal accounts and investments.

Line 9610 – Gravel

Enter the amounts you received from the sale of soil, sand, gravel, or stone. For some of these items, you can claim a depletion allowance.

Line 9611 – Trucking (farm-related only)

Enter the amounts you received for trucking related to your farming business.

Line 9612 – Resales of commodities purchased

Report the total sales of commodities that you did not produce on your farm. These are commodities that you bought for resale.

Enter the corresponding purchases you made in this fiscal period on Line 9827 – Purchases of commodities resold.

Line 9613 – Leases (gas, oil well, surface, etc.)

If you received payments for leasing your farmland for petroleum or natural gas exploration, these payments will be either income or a capital receipt.

Include in your income the yearly amounts for rental, severance, or inconvenience from a surface rental agreement.

The first payment from these agreements is often larger than the rest of the annual payments. However, the agreement may not specify how much of the first payment is for such things as damage to land, land improvements, severance, inconvenience, or the first year's rent. When this happens, in the year you received the first payment, include in income an amount that is equal to the annual payment you will receive in the following years. The rest of the first payment is a payment for property. This may result in either a capital gain or loss. For more information on capital gains, see Chapter 6.

Line 9614 – Machine rentals

Enter the amounts you received from renting your farm machinery.

Line 9600 – Other (specify)

Enter the total amount of all other types of farming income not listed on the form. Then list the items on the blank lines provided under it.

Report all program non-allowable farming income including:

• aquaculture
• trees and seedlings sold for use in reforestation
• peat moss
• wild game reserves

Income from wood sales, as defined in Wood sales (including stumpage), is also non-allowable but is reported using code 259.

Income from cannabis (except for industrial hemp) is also non-allowable but is reported using code 382.

The following paragraphs identify some of the other income items you can enter on line 9600.

Return of fuel charge proceeds to farmers tax credit

This credit is considered to be government assistance that you received in the year and is taxable to you. Include the amount of the credit in your income in the same tax year you claimed the credit.

To calculate your credit, fill in Form T2043, Return of Fuel Charge Proceeds to Farmers Tax Credit.

Air quality improvement tax credit

This credit is received immediately before the end of the tax year to which it relates and is considered government assistance. Government assistance is generally included in income. When you receive government assistance for the acquisition of a depreciable property, reduce the capital cost of that property by the amount of the assistance.

For more information on government assistance, see Grants, subsidies, and rebates and Interpretation Bulletin IT-273, Government Assistance – General Comments.

Insurance proceeds

Enter the amount of any insurance proceeds you received as compensation for loss or damage to certain types of property. For example, you may have received insurance proceeds for damage to a building due to fire, or for the loss of livestock due to disease.

Enter the total insurance proceeds on this line if you are being reimbursed for either:

• the cost of non-depreciable property you previously deducted as a current expense
• the cost of property that was a saleable item, such as livestock

If the insurance proceeds compensated you for damages to depreciable property, and you used all of them to repair the property within a reasonable period of time, include the proceeds as income on this line. Claim a deduction for the same amount in the "Expenses" area on page 4 of the form. Claim repairs to depreciable property that is machinery on line 9760 and repairs to motor vehicles on line 9819. If you did not spend all of the insurance proceeds on repairs within a reasonable length of time, we consider the amounts you did not spend to be proceeds of disposition. For more information, see Column 5 – Proceeds of dispositions in the year.

Insurance proceeds that compensate you for replacement of lost or destroyed depreciable property are considered to be proceeds of disposition for that depreciable property. Do not include this type of insurance proceeds on line 9600. For more information, see Chapter 4. For information on how insurance affects the adjusted cost base of capital property, see Chapter 6.

Do not include insurance proceeds from federal, provincial, or municipal government programs. For the codes to use for government insurance programs, see the Program payment lists A and B.

Miscellaneous

You can deduct 100% of the cost of property such as small tools if they cost less than $500. If you bought the property and you later sold that property, you have to include this amount as income you received from the sale.

Include in your income prizes you won from fairs or farming exhibitions. For more information, see Income Tax Folio S3-F9-C1, Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime.

Enter resales and rebates of allowable expenses on line 9574.

Temporary taxable benefits

You can include the Northern Business Relief Fund as well as the Canada Emergency Response Benefit (CERB) if you claimed the CERB to compensate for business income loss due to the COVID-19 pandemic.
For more information, go to COVID-19 benefits and your taxes.

Summary of income

From the "Income" section of the form, enter the amount of Total A and the amount of Total B in the "Summary of income" table. Add the totals for your gross farming income. Gross farming income is your total farming income before you deduct expenses.

Expenses

Use the Commodity list and Program payment code lists A and B to report your commodity purchases and repayment of program benefits in this section. If you have more than one farming operation, use Form T1164 for each additional operation.

Codes may change from year to year. Check the lists to make sure you use the right code.

If you use the accrual method of accounting, report all your changes in opening and closing commodity inventories separately, using the commodity code for both entries.

You cannot include expenses for your personal use of either of the following:

• property of your farming business
• partnership property or services

In addition, you cannot include any of the following as part of your expenses:

• the cost of saleable goods or services you, your family, or your partners and their families personally used or consumed, such as dairy products, eggs, fruit, vegetables, poultry, and meat
• donations to charities and political contributions
• interest and penalties you paid on your personal income tax
• most life insurance premiums (see Line 9804 – Other insurance premiums)

For AgriStability, there are two types of expenses:

• allowable expenses
• non-allowable expenses

Allowable expenses are the operating or input expenses you paid that directly relate to producing your commodities.

Non-allowable expenses are costs not directly related to producing your commodities. These include amounts paid for interest and capital-related expenses.

For AgriInvest, only allowable commodity purchases are used to calculate your allowable net sales.

Current or capital expenses

Renovations and expenses that extend the useful life of your property or improve it beyond its original condition are usually capital expenses. However, an increase in a property's market value because of an expense is not a major factor in deciding whether the expense is capital or current. To decide whether an amount is a current expense or a capital expense, consider your answers to the questions in the following chart.

For more information, see Chapter 4 and Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Do not include any of the following in your expenses:

• salary, wages (including drawings) paid to self, partner(s), or both
• the cost of saleable goods or services you, your family, or your partners and their families used or consumed (including items such as food, home maintenance, and business properties)
• items such as dairy products, eggs, fruit, vegetables, poultry, and meat
• donations to charities and political contributions
• interest and penalties you paid on your income tax
• most life insurance premiums (for information on a limited exception, see Line 9804 – Other insurance premiums)
• the part of any expenses that can be attributed to non-business use of business property
• most fines and penalties imposed, under the law of Canada or a province or a foreign country

Disability-related modifications

You can deduct expenses you incur for eligible disability-related modifications made to a building in the year you paid them. You can do this instead of adding them to the capital cost of your building. Eligible disability-related modifications include changes you make to accommodate wheelchairs, such as:

• installing hand activated power door openers
• installing interior and exterior ramps
• modifying a bathroom, an elevator, or a doorway

You can also deduct expenses paid to install or get the following disability-related devices and equipment:

• elevator car position indicators (such as braille panels and audio indicators)
• visual fire alarm indicators
• listening or telephone devices for people who have a hearing impairment
• disability specific computer software and hardware attachments

Grants, credits, and rebates

Subtract, from the applicable expense, any grant, credit, and rebate you received.

If the grant, credit, and rebate are for a depreciable asset, subtract the amount of the rebate from the property's capital cost before calculating the capital cost allowance. For more information, see Chapter 4. If the asset qualifies for the investment tax credit, this reduction to the capital cost will also affect your claim. For more information, see Form T2038(IND), Investment Tax Credit (Individuals).

Input tax credits are considered government assistance. Include the amount you claimed on line 108 of your GST/HST return on line 9574 or 9575 only if you cannot apply the rebate, grant, or assistance you received to reduce a particular expense or an asset's capital cost.

GST/HST input tax credits and exempt goods and services

GST/HST registrants may claim an input tax credit for the GST/HST they paid or owe for expenses used to provide taxable property and services at the rates of 0%, 5%, 13%, or 15%.

If you claim the GST/HST you paid or owe on your expenses as an input tax credit, reduce the amounts of the business expenses you claim by the amount of the input tax credit. Do this when the GST/HST for which you are claiming the input tax credit was paid or became payable, whichever is earlier. Enter the net expense figure on the appropriate line of Form T1163 or T1164.

Input tax credits you claim for the purchase of depreciable property used in your business will affect your claim for CCA. Include the amount you claimed on line 108 of your GST/HST return on line 9574 or 9575 only if you cannot apply the rebate, grant, or assistance you received to reduce a particular expense or an asset's capital cost.

For more information on how claiming the input tax credit for registrants will affect your CCA claim, see Column 2 – Undepreciated capital cost (UCC) at the start of the year.

Some purchases of property and services are exempt from GST/HST. Because you do not pay GST/HST on these purchases, there is no input tax credit to claim. Examples of exempt purchases of property include:

• insurance services sold by insurance companies, agents, or brokers
• most services provided by financial institutions, such as arranging loans or mortgages
• most health, medical, and dental services

Since you don’t pay GST/HST on zero rated purchases, there is no input tax credit to claim for these purchases. For examples of zero-rated property and services, see GST/HST rates.

For more information on claiming the input tax credits and the percentage of use in commercial activity, see GST/HST Memorandum 8.1, General Eligibility Rules, and GST/HST Memorandum 8.2, General Restrictions and Limitations.

Eligible registrants can file their GST/HST returns online by using GST/HST NETFILE or the "File a return" service in My Business Account. Go to GST/HST for information about GST/HST.

Prepaid expenses

A prepaid expense is an expense you paid for ahead of time. Under the accrual method of accounting, claim the expense you prepay in the year or years in which you get the related benefit. Suppose your fiscal year-end is December 31, 2023. On June 30, 2023, you prepay the rent on your building for a full year (July 1, 2023, to June 30, 2024). You can only deduct one half of this rent as an expense in 2023. You can deduct the other half as an expense in 2024.

Under the cash method of accounting, you cannot deduct a prepaid expense amount (other than for inventory) relating to a tax year that is two or more years after the year the expense is paid. However, you can deduct the part of an amount you paid in a previous year for benefits received in the current tax year. These amounts are deductible as long as you have not previously deducted them.

If you paid $600 for a three-year service contract for office equipment in 2023, you can deduct $400 in 2023. This represents the part of the expense that applies to 2023 and 2024. On your 2025 income tax return, you could then deduct the balance of $200 for the part of the prepaid lease that applies to 2025.

For more information, see Interpretation Bulletin IT-417, Prepaid Expenses and Deferred Charges.

Business-use-of-home expenses

You can deduct expenses for the farming business use of a workspace in your home, if you meet one of these conditions:

• it is your principal place of business
• you use the space only to earn income from your farming business, and you use it on a regular and ongoing basis to meet your clients or customers

You can deduct part of your maintenance costs such as heating, home insurance, electricity, and cleaning materials. You can also deduct part of your property taxes, mortgage interest, and CCA.

If you rent your home, you can deduct the part of the rent and any expenses you incur that relate to the work space. To calculate the part you can deduct, use a reasonable basis, such as the area of the work space divided by the total area of your home.

The amount you can deduct for business-use-of-home expenses cannot be more than your net income from the farming business before you deduct these expenses. In other words, for income tax purposes, you cannot use these expenses to increase or create a farming business loss. If you claimed business-use-of-home-expenses and you report a farming loss on line 9944, you must adjust your loss for income tax purposes at line 9934. For more information on how to make this adjustment, see the instructions for line 9934.

The capital gain and recapture rules will apply if you deduct CCA on the business use part of your home and you later sell your home. For more information about these rules, see Chapters 4 and 6 as well as Guide T4037, Capital Gains.

Include your expenses for business-use-of-home on Line 9896 – Other (specify) of Form T1163 or T1164. For more information, see Additional expenses (partnerships) and Line 9934 – Adjustment to business-use-of-home expenses.

Business-use-of-home expenses are non-allowable expenses for AgriStability and AgriInvest.

For more information, see Income Tax Folio S4-F2-C2, Business Use of Home Expenses.

Commodity purchases

Report the following as commodity purchases:

• feed
• seed
• plants
• transplants
• livestock
• marketable products

If you are an apple producer replacing damaged or dead trees, enter apple tree purchases using the code for apples. If you are buying trees to expand an orchard, enter this purchase as a capital expense.

Do not include the cost of seeds and plants you used in your personal vegetable or flower garden.

Include expenses you incurred from the use of commodities with the commodity purchases, except for pollination fees. For example, report stud fees with horse purchases. However, enter pollination fees using code 376.

If you made a payment in kind for a farming business commodity purchase, enter the value of the payment as a purchase. For more information, see Payment in kind.

If you are a tenant in a crop share, only include your share of the crop in your income or expenses.

Livestock owners and custom feedlot operators with prepared feed purchases

If the ingredients on your purchase invoices of prepared feed and protein supplements are listed separately, enter:

• allowable commodities (such as grains, forage, and oilseeds) and protein supplements using code 046
• the remaining expenses (such as minerals and salts) using code 570

If the ingredients on your purchase invoices of prepared feed and protein supplements are not listed separately, enter your total purchase using code 571 (we will use 65% of this amount to calculate your allowable net sales).

Livestock owners with custom feeding expenses

If the ingredients on your purchase invoices are listed separately, enter:

• allowable commodities (such as grains, forage, and oilseeds) and protein supplements using code 577
• the remaining expenses (such as minerals and salts) using code 572

If the ingredients on your purchase invoices are not listed separately, enter your total purchase using code 573 (we will use 70% of this amount to calculate your allowable net sales).

Ranch fur operators with prepared feed purchases

If the ingredients on your purchase invoices of prepared feed and protein supplements are listed separately, enter:

• allowable commodities (such as grains, forage, and oilseeds) and protein supplements using code 046
• the remaining expenses (such as minerals and salts) using code 310

If the ingredients on your purchase invoices of prepared feed and protein supplements are not listed separately, enter your total purchases using code 574 (we will use 20% of this amount to calculate your allowable net sales).

Livestock insurance premiums

Enter premiums you paid for private livestock insurance using Line 9953 – Private insurance premiums for allowable commodities.

Repayment of program benefits

If you had to repay a program benefit, report the repayment as a purchase using the code for the program. Amounts you repaid are shown in box 17 of your AGR-1 slip.

If you repay a program benefit from the programs listed on lines 9540 and 9544, enter the amounts you repaid on Line 9896 – Other (specify).

AgriStability program – Allowable expenses

Line 9661 – 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 greenhouse, report the cost of your containers and pots for the plants you sold.

Line 9662 – Fertilizers and soil supplements

Enter the total amount you paid for fertilizers and lime you used in your farming business.

If you used soil supplements or other growth media, report the amounts you paid for them here. Examples of soil supplements include mulch, sawdust, and weed-mats.

Report your expenses for water you purchased to produce your commodity (crop or livestock) if it was not included in your municipal taxes.

Line 9663 – Pesticides and chemical treatments

Enter the total amount you paid for herbicides, insecticides, rodenticides, and fungicides.

Insecticides include chemicals for pest control purposes as well as any predators or parasites introduced for that use. Also report the total amount you paid for chemicals used in treating water, manure, or slurry, as well as those used in disinfecting equipment and facilities.

Report seed treatment expenses on this line if the treatment is listed separately from the seed purchase on your original invoice. If not listed separately, include the treatment as part of the commodity purchase.

Line 9665 – Insurance premiums (crop or production)

Enter the total amount of premiums paid for crop or production insurance (AgriInsurance), including hail insurance on this line. Do not include premiums for Alberta Spring Price Endorsement. For information on other types of insurance premiums such as private, business related, or motor vehicle insurance, see Line 9804 – Other insurance premiums.

Line 9713 – 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 such fees include the cost of artificial insemination, stud service and semen, embryo transplants, disease testing, and neutering or spaying.

Line 9714 – Minerals and salts

Enter the total purchases of minerals, salts, vitamins, and premixes (which are mainly minerals and vitamins).

If you have purchased feed expenses, see Custom Feedlot Operators for information on the codes you use to report these amounts.

Line 9764 – Machinery (gasoline, diesel fuel, oil)

Enter the total amount you paid for fuel and lubricants for your machinery used in your farming operation.

Line 9799 – Electricity

Only the part of your electricity costs that relates to your farming business is deductible. To determine the part you can deduct, keep a separate record of the amounts that apply to the farmhouse and other farm properties.

The business part of your electricity expense will depend on how much electricity is used for the barns and shops. Because the electricity for the farmhouse is a personal expense, you cannot deduct it unless you meet the conditions explained in Business-use-of-home expenses. Include your expenses for business-use-of-home on Line 9896 – Other (specify).

Do not include the electricity expense for a house that you rented to someone else. This is a rental expense, which you enter on Form T776, Statement of Real Estate Rentals.

Line 9801 – Freight and shipping

Enter the amount you paid for shipping farm inputs to your operating site and shipping farm produce to market.

Enter amounts you paid for carcass disposal on this line.

If you were trucking for someone else, the trucking expenses are non-allowable for AgriStability. For more information on how to report these costs, see Line 9798 – Agricultural contract work.

For information on how to report freight and shipping charged after the point of sale, see Line 575 – Point of sale adjustments.

Line 9802 – Heating fuel

Enter the total amount you paid for natural gas, coal, and oil to heat farm buildings. Also, enter your expenses for fuel used for curing tobacco, crop drying, or greenhouses.

You can deduct only the part of these costs that relate to your farming business. To determine the part you can deduct, keep a separate record of the amounts you paid for the farmhouse and other farm properties.

The business part of your heating fuel expense will depend on how much heating fuel you used for the barns and shops. Because the heating fuel for the farmhouse is a personal expense, you cannot deduct it unless you meet the conditions explained in Business-use-of-home expenses. Include your expenses for business-use-of-home on Line 9896 – Other (specify).

Do not include heating fuel expenses for a house that you rented to someone else. This is a rental expense, which you enter on Form T776, Statement of Real Estate Rentals.

Line 9815 – Arm's length salaries

Enter the amount of gross wages you paid to your employees. Include the cost of room and board for hired help. If you hire temporary foreign workers, you may also include the costs related to transporting workers to your work site. 

For AgriStability purposes, you may also include variable costs associated with disposable personal protective equipment for employees due to COVID-19, such as gloves, masks and sanitizer. Do not include costs incurred for improvements to capital items such as workplace modifications, additional housing or installing protective barriers. These improvements are more permanent and have long term benefits that are considered non allowable under the program.

Do not include salaries paid to related persons (see the definition below). If you paid salaries to related persons, see Line 9816 – Non-arm's length salaries.

Related persons are:

• individuals connected by blood relationship, marriage or common-law partnership, or adoption
• a corporation, and:
  • an individual, group of persons, or entity that controls the corporation
  • an individual, group of persons, or entity of a related group that controls the corporation
  • any individual related to a person described above

Salaries or drawings paid to yourself are not deductible for tax purposes.

As the employer, you must deduct your part of the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP) contributions and employment insurance premiums. You can also deduct workers' compensation amounts payable on employees' remuneration and Provincial Parental Insurance Plan (PPIP) premiums. The PPIP is an income replacement plan for residents of Quebec. For details, contact Revenu Québec. For information on making payroll deductions, go to Payroll.

Do not deduct the amounts you withheld from your employees' remuneration since you already deducted them in the amount you claimed as wages.

You may have paid wages in kind to your employees. For example, you may have paid your employees by giving them livestock or grain instead of cash. If you did this:

• your employees include in their income the value of the livestock or grain
• you include the same amount in your gross sales for the year and deduct it as a wage expense

Keep a detailed record of the amounts you paid to each employee and the employee's name, address, and social insurance number.

Line 9822 – Storage/drying

Enter the amount you paid for storing and drying commodities. For example, include:

• amounts paid for storage and drying services
• air treatment expenses
• purchase of germination inhibitors and other preservative agents

Enter electricity and heating fuel costs incurred in storage and drying commodities on lines 9799 – Electricity, and 9802 – Heating fuel, respectively.

Line 9836 – Commissions and levies

Enter the amount you paid in commissions and levies incurred in the sale, purchase, or marketing of commodities. Also include levies paid to marketing boards, except those due to penalties or fines you incurred. Do not include commissions paid to a salesperson you contracted to market your product.

If you market fruit or vegetables through a co-op, enter your pack-and-sell expenses here, except pack-and-sell expenses incurred after the point of sale. Enter these amounts on Line 575 – Point of sale adjustments.

Line 9953 – Private insurance premiums for allowable commodities

Enter your private insurance premiums paid for allowable commodities such as livestock.

Enter premiums for hail insurance on Line 9665 – Insurance premiums (crop or production).

Do not include any premiums for:

• private insurance for non-allowable commodities
• business-related insurance
• motor vehicle insurance

For information on other types of insurance premiums, see Line 9804 – Other insurance premiums.

AgriStability program – Non-allowable expenses

Line 9760 – Machinery (repairs, licences, insurance)

Enter the total amount of repair, licence fee, and insurance premiums for your machinery. If you received insurance proceeds to help pay for repairs, see Insurance proceeds.

Line 9765 – Machinery lease/rental

Enter the amount you paid for leasing machinery used to earn your farming income.

If you lease a passenger vehicle, see Line 9829 – Motor vehicle interest and leasing costs.

If you entered a lease agreement, you can choose to treat your lease payments as combined payments of principal and interest. However, you and the person from whom you are leasing must agree to treat the payments this way.

In this case, we consider that you have:

• bought the machinery rather than leased it
• borrowed an amount equal to the fair market value of the leased machinery

You can deduct the interest part of the payment as an expense. You can also claim capital cost allowance (CCA) on the machinery. For more information on CCA, see Chapter 4. You can make this choice as long as the machinery qualifies and the total fair market value (FMV) of all the machinery that is subject to the lease is more than $25,000. For example, a combine that you lease with a FMV of $35,000 qualifies. However, office furniture and automobiles often do not.

To treat your lease this way, attach one of the following forms with your income tax return for the year you make the lease agreement:

• Form T2145, Election in Respect of the Leasing of Property
• Form T2146, Election in Respect of Assigned Leases or Subleased Property

Both of these forms explain which property qualifies for this treatment.

Line 9792 – Advertising and promotion costs

Enter the amount you paid for advertising and promoting your farm products.

If you market fruit or vegetables through a co-op, see Line 9836 – Commissions and levies for information on how to report your pack-and-sell expenses.

Line 9795 – Building and fence repairs

Enter the amount you paid for repairs to fences and all buildings you used for farming, except your farmhouse. Do not include the value of your own labour. If the expenditure improved a fence or building beyond its original condition, the costs are capital expenditures. Add the expenditure to the cost of the asset or building on your capital cost allowance (CCA) charts on Form T1175, Farming – Calculation of Capital Cost Allowance (CCA) and Business-use-of-home Expenses. We explain the CCA charts in Chapter 4.

For more information on capital expenditures, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Line 9796 – Land clearing and draining

Enter the total of the expenses listed below. In most cases, you can deduct the costs for:

• clearing the land of brush, trees, roots, and stones
• first ploughing of the land for farm use
• building an unpaved road
• installing land drainage

You do not have to deduct all of the costs in the year you paid them. If you paid all of the costs, you can deduct any part of them in the year you paid them. You can carry forward any part of the costs you did not deduct to another year. However, if you rented land to someone else, you cannot deduct the costs mentioned above. Instead, you may be able to do one of the following:

• add these costs to the cost of the land
• add these costs to the cost of the building if you plan to build on the land right away
• include these costs under Class 8 in the CCA charts on Form T776, Statement of Real Estate Rentals, if you installed a tile, plastic, or concrete land drainage system. In this case, you also need to add the costs for a tile, plastic or concrete land drainage system to Class 8 on your CCA charts on Form T2042. For more information, see Chapter 4

For more information, see Interpretation Bulletin IT-485, Cost of clearing or levelling land.

Improving land

You cannot deduct the cost of a paved road. Instead, you have to add this cost to Class 17 of your CCA charts on Form T1175. For more information, see Chapter 4.

You can deduct most of the cost to drill or dig water wells in the year you did the work. However, you have to add some of the costs to Class 8 on your CCA charts. The costs you add to Class 8 are those you incurred to purchase and install:

• the casing and cribwork for the well
• the system that distributes water, including the pump and pipes

You can deduct amounts you paid to have public utilities brought to your farm, as long as the installations remain the property of the utility.

You can deduct amounts you paid under the Canada Cooperatives Act to build a distribution system under a gas service contract.

Line 9798 – Agricultural contract work

Enter the expenses you paid for custom and contract work, other than custom feeding. For example, you may have had a contract with someone who cleaned, sorted, graded, and sprayed the eggs your hens produced, or someone who had facilities to age the cheese you produced. You may have also contracted someone to do your harvesting, combining, crop dusting, or seed cleaning.

If you are a custom feedlot operator, see Livestock owners and custom feedlot operators with prepared feed purchases for information on reporting your custom feeding expenses.

For AgriStability, agricultural contract work is a non-allowable expense. However, if the charges on your invoice are listed separately, report amounts that are allowable expenses for AgriStability on their specific line.

For example, your invoice lists the costs charged for chemical, fuel, and salaries. Enter these amounts as follows:

• chemical on Line 9663 – Pesticides and chemical treatments
• fuel on Line 9764 – Machinery (gasoline, diesel fuel, oil)
• salaries on Line 9815 – Arm's length salaries

Enter the remaining non-allowable amounts on line 9798.

Line 9804 – Other insurance premiums

Enter the amount of business-related insurance premiums you paid to insure your farm buildings, farm equipment (excluding machinery and motor vehicles), and business interruption. Include premiums for Alberta Spring Price Endorsement on this line. For information on reporting premiums for hail insurance or livestock, see Line 9665 – Insurance premiums (crop or production) and Line 9953 – Private insurance premiums for allowable commodities.

In most cases, you cannot deduct your life insurance premiums. However, if you use your life insurance policy as collateral for a loan related to your farming business, you may be able to deduct a limited part of the premiums you paid. For more information, see Interpretation Bulletin IT-309, Premiums on Life Insurance Used as Collateral.

In most cases, you cannot 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 can deduct the business part of these costs. For more information, see Business-use-of-home expenses, and Line 9819 – Motor vehicle expenses.

Premiums to a private health services plan

You can deduct premiums paid to a private health services plan (PHSP) if you meet the following conditions:

• you are actively engaged in your business on a regular and continuous basis, individually or as a member of a partnership
• the premiums are paid to insure yourself, your spouse or common-law partner, or any member of your household
• in the year or previous tax year one of the following applies:
  • your net income from self-employment (excluding losses and PHSP deductions) is more than 50% of your total income^{Footnote 1}
  • your income from sources other than self-employment^{Footnote 2} is $10,000 or less

You cannot claim a deduction for PHSP premiums if another person deducted the amount, or if you or anyone else claimed the premiums as a medical expense. For your premiums to be deductible, your PHSP coverage has to be paid under a contract with one of the following:

• an insurance company
• a trust company
• a person or partnership in the business of administering PHSPs
• a tax-exempt trade union of which you or the majority of your employees are members
• a tax-exempt business organization or a tax-exempt professional organization of which you are a member

For more information on PHSPs, see Interpretation Bulletin IT-339, Meaning of 'private health services plan' (1988 and subsequent tax years), or go to Private health services plan.

For the purposes of this claim, the following terms apply:

Arm's length employees are, generally, employees who are not related to you and who are not carrying on your business with you, for example, as your partners. For more information, see Arm's length.

Qualified employees are arm's length, full-time employees who have three months service since they last became employed with a business carried on by you, a business in which you are a majority interest partner, or a business carried on by a corporation affiliated with you. Temporary or seasonal workers are not qualified employees.

Insurable persons are people to whom coverage is extended and who are either:

• qualified employees
• people who would be qualified employees if they had worked for you for three months
• people carrying on your business (including yourself and your partners)

How to calculate your maximum deduction for PHSPs

The following sections explain how to calculate your maximum PHSP deduction based on whether you had employees and whether you insured them throughout the year or for part of the year. Find the section that describes your situation.

If you did not have any employees throughout 2023

Your PHSP deduction is restricted by an annual dollar limit. The limit is a maximum of:

• $1,500 for yourself
• $1,500 for your spouse or common-law partner and each household member that is 18 years of age or older at the start of the period they were insured
• $750 for each household member under the age of 18 at the start of the period

The maximum deduction is also limited by the number of days that person was insured. Calculate your allowable maximum for the year by using the following formula:

A ÷ 365 × (B + C), where:

• A is the number of days during the period of the year you insured yourself and your household members, if applicable
• B equals $1,500 × the number of household members 18 years of age or older insured during that period
• C equals $750 × the number of household members under the age of 18 insured during that period

If you had employees throughout 2023

If you had at least one qualified employee throughout all of 2023, and at least 50% of the insurable persons in your business were qualified employees, your claim for PHSP premiums is limited in a different way. Your limit is based on the lowest cost of equivalent coverage for each of your qualified employees.

Use the following steps to calculate your maximum allowable claim for the PHSP premiums paid for yourself, your spouse or common-law partner, and your household members.

For each of your qualified employees, calculate the following:

X × Y = Z, where:

• X equals the amount you would pay to provide yourself, your spouse or common-law partner, and your household members with coverage equal to that provided to a particular employee, his or her spouse or common-law partner, and household members
• Y equals the percentage of the premium you pay for that particular employee
• Z equals your limit based on that particular employee

If you had more than one qualified employee, you have to do the X × Y = Z calculation for each employee. Your limit is then the least amount you calculate for each employee.

If you had employees throughout 2023 but the number of arm's length employees you insured was less than 50% of all the insurable persons in your business, your maximum allowable deduction is the lesser of the following two amounts:

Amount 1

Determine this amount by calculating:

A ÷ 365  × (B + C), where:

• A is the number of days during the period of the year you insured yourself and your household members, if applicable, but insured less than 50% of your employees
• B equals $1,500 × the number of household members 18 years of age or older insured during that period
• C  equals $750 × the number of household members under the age of 18 insured during that period

Amount 2

If you had at least one qualified employee, Amount 2 is the lowest cost of equivalent coverage for each qualified employee, calculated by using the X × Y = Z formula in the previous example. If you did not have at least one qualified employee, the limit in Amount 1 will apply.

If you had employees for part of the year

If you had at least one qualified employee for part of the year and your insurable arm's length employees represented at least 50% of all the insurable persons in your business, calculate your limit for that period by using the X × Y = Z formula of If you had employees throughout 2023.

For the rest of the year when you had no employees or when your insurable arm's length employees represented less than 50% of all the insurable persons in your business, your deduction limit for that remaining period is the lesser of Amount 1 and Amount 2, calculated in the same way as in the previous section.

Undeducted premiums

If you deduct only part of your PHSP premium at line 9804 and you paid the premium in the year, you can include the undeducted balance when you calculate your non-refundable medical expense tax credit. For more information, see Line 33099 – Medical expenses for self, spouse or common-law partner, and your dependent children under 18 years of age, for someone who died.

Line 9805 – Interest (real estate, mortgage, other)

You can deduct interest you incurred on money borrowed for farming business purposes or to acquire property for farming business purposes. However, there are limits on:

• The interest you can deduct on money you borrowed to buy a passenger vehicle or a zero emission passenger vehicle. For more information, see Line 9819 – Motor vehicle expenses
• The amount of interest you can deduct for vacant land. Usually, you can only deduct interest up to the amount of income from the land that remains after you deduct all other expenses. You cannot use any remaining amounts of interest to create or increase a loss, and you cannot deduct them from other sources of income

You can report interest you paid on any real estate mortgage you incurred to earn farming income, but you cannot deduct the principal part of loan or mortgage payments. Do not deduct interest on money you borrowed for personal purposes or to pay overdue income taxes.

You may be able to report interest expenses for a property you used for farming business purposes, even if you have stopped using the property for such purposes because you are no longer in the farming business. For more information, see Income Tax Folio S3-F6-C1, Interest Deductibility, or call 1-800-959-5525.

Line 9807 – Memberships/subscription fees

Enter the amount of annual dues or fees you paid to keep your membership in a trade or commercial farming association. You cannot deduct club membership dues (including initiation fees) if the main purpose of the club is dining, recreation, or sporting activities.

You can also report fees for subscriptions to farming publications you use in your farming business.

Enter the amounts you paid for your AgriStability administrative cost share (ACS) and your fee on this line.

Line 9808 – Office expenses

You can report the cost of office expenses. These include small items such as pens, pencils, paper clips, stationery, and stamps. Office expenses do not include items such as calculators, filing cabinets, chairs, and desks. These are capital items. For more information on capital property, see Class 14.1 (5%).

Line 9809 – Legal and accounting fees

Report the fees you incurred for external professional advice or services, including consulting fees.

You can report accounting and legal fees you incur to get advice and help in keeping your records. You can also report fees you incur for preparing and filing your income tax and GST/HST returns.

You can deduct accounting or legal fees you paid to have an objection or appeal prepared against an assessment for income tax, CPP or QPP contributions, or EI premiums. However, the full amount of these deductible fees must first be reduced by any reimbursement of these fees you have received. Report the difference on line 23200 of your income tax return. If you received a reimbursement in 2023 for the types of fees you deducted in a previous year, enter the amount you received on line 13000 of your 2023 income tax return.

You cannot report legal and other fees you incur to buy capital property. Instead, add these fees to the cost of the property. For more information on capital property, see Class 14.1 (5%).

For more information, see Interpretation Bulletin IT-99, Legal and Accounting Fees.

Line 9810 – Property taxes

Enter the amount of land, municipal, and realty taxes you paid for property used in your farming business. Since the municipal tax for the farmhouse is a personal expense, you cannot report it unless you meet the conditions explained in Business-use-of-home expenses.

If you are repaying a loan for land drainage through your property tax payments to your township, you cannot include the amount you repaid as part of your property tax expense.

Line 9811 – Rent (land, buildings, pastures)

Enter the amount of rent you paid for land, buildings, and pastures you used for your farming business.

If you farmed in a crop share and paid your landlord a share of the crop, only include your share of the crop in your income and expenses.

Line 9816 – Non-arm's length salaries

Keep a detailed record of the amounts you paid to each related person. For a definition of related persons, see Line 9815 – Arm's length salaries.

As the employer, you must deduct your part of CPP or QPP contributions and employment insurance premiums. You can also deduct workers' compensation amounts payable on employees' remuneration and Provincial Parental Insurance Plan (PPIP) premiums. The PPIP is an income replacement plan for residents of Quebec. For details, contact Revenu Québec. For information on making payroll deductions, go to Payroll.

Do not deduct the amounts you withheld from remuneration, since you already deducted them in the amount you claimed as wages. Do not include the cost of board.

The terms "salaries" and "wages" are used interchangeably in the description of this non-allowable expense.

You can deduct the wages you paid to your child, as long as you meet all of these conditions:

• you paid the wages by cheque, in cash or in kind
• the work your child did was necessary for you to earn farm income
• the wages were reasonable when you consider your child's age
• the amount you paid is what you would have paid someone else to do the same work

Keep documents to support the wages you paid to your child. If you paid your child by cheque, keep the cancelled cheque. If you paid cash, have your child sign a receipt.

If you paid wages in kind to non-arm's length employees (including your spouse or children), report such wages in the same manner that is described at Line 9815 – Arm's length salaries.

You can deduct wages you paid to your spouse or common-law partner, as long as that person is not a partner in your business and you follow the same rules that apply to wages paid to your child.

If you were a partner of a farm partnership that employed your or your partner's spouse or common-law partner, the farm partnership can deduct that person's wages if it incurred the expense to earn farming income and the wages were reasonable.

Line 9819 – Motor vehicle expenses

Business use of a motor vehicle or passenger vehicle (including zero-emission vehicles and zero-emission passenger vehicles)

If you use your motor vehicle or a passenger vehicle for personal and business use, you can deduct only the part of the expenses you paid to earn farming income. Farming business use includes things such as trips to pick up parts and farm supplies, or to deliver grain. You can deduct the full amount of parking fees related to your business activities and supplementary business insurance for your motor vehicle or passenger vehicle. If you did not live on your farm, the travel between the farm and your home is not considered business travel.

To support the amount you can deduct, keep a record of the total kilometres you drive and the kilometres you drive to earn income. Also, keep track of what it costs you to run and maintain the motor vehicle for your fiscal period.

What type of vehicle do you own

The kind of vehicle you own can affect the expenses you can deduct. For income tax purposes, you should know the definitions of motor vehicles, zero-emission vehicles, passenger vehicles, and zero-emission passenger vehicles.

A motor vehicle is an automotive vehicle designed or adapted for use on highways and streets. A motor vehicle does not include a trolley bus or a vehicle designed or adapted to be operated only on rails.

A zero-emission vehicle and a zero-emission passenger vehicle are motor vehicles. For more information on these types of vehicles, see zero-emission vehicle.

A passenger vehicle is a motor vehicle that is owned by the taxpayer (other than a zero-emission vehicle) or that is leased, and is designed or adapted primarily to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pick-up trucks are passenger vehicles.

Passenger vehicles and zero-emission passenger vehicles are subject to limits on the amount of CCA, interest, and leasing cost that may be deducted. They do not include:

• an ambulance
• a clearly marked police or fire emergency response vehicle
• a motor vehicle you bought to use more than 50% as a taxi, a bus used in the business of transporting passengers, or a hearse used in a funeral business
• a motor vehicle you bought to sell, rent, or lease in a motor vehicle sales, rental, or leasing business
• a motor vehicle (except a hearse) you bought to use in a funeral business to transport passengers
• a van, pick-up truck, or similar vehicle that seats no more than the driver and two passengers and that, in the tax year you bought or leased it, was used more than 50% to transport goods and equipment to earn income
• a van, pick-up truck, or similar vehicle that, in the tax year you bought or leased it, was used 90% or more to transport goods, equipment, or passengers to earn income
• a pick-up truck that, in the tax year you bought or leased it, was used more than 50% to transport goods, equipment, or passengers to earn or produce income at a remote work location or at a special work site that is at least 30 kilometres from the nearest community with a population of at least 40,000
• a clearly marked emergency medical service vehicle used to carry paramedics and their emergency medical equipment

If you own a passenger vehicle or a zero-emission passenger vehicle (ZEPV), or you lease a passenger vehicle or a passenger vehicle that would otherwise qualify as a ZEPV, there may be a limit on the amounts you can deduct for CCA, interest, and leasing costs.

The following chart will help you to determine if you have a motor vehicle or a passenger vehicle. The chart does not cover every situation, but it gives some of the main definitions for vehicles bought or leased and used to earn self-employment income.

Do not include any of the following:

• interest on the money you borrow for a motor vehicle
• leasing costs for a motor vehicle
• the capital cost allowance (CCA)

For more information on interest and leasing costs, see Line 9829 – Motor vehicle interest and leasing costs. For more information on CCA, see Chapter 4.

For more information on motor vehicle expenses, see Interpretation Bulletin IT-521, Motor Vehicle Expenses Claimed by Self-Employed Individuals.

Simplified logbook for motor vehicle expense provisions

Following a Federal initiative to reduce the paper burden on businesses, you can choose to maintain a full logbook for one complete year to establish a base year's business use of a vehicle.

After one complete year of keeping a logbook to establish the base year, you can use a three month sample logbook to extrapolate business use for the entire year, as long as the usage is within the same range (within 10%) of the results of the base year. Businesses will have to show that the use of the vehicle in the base year remains representative of its normal use.

More than one vehicle

If you use more than one motor vehicle or passenger vehicle for your business, for each vehicle keep a separate record that shows the total personal use kilometres and business kilometres you drive, as well as the cost to run and maintain each vehicle. Calculate each vehicle's expenses separately.

For more information, see Interpretation Bulletin IT-521, Motor Vehicle Expenses Claimed by Self-Employed Individuals.

Line 9820 – Small tools

If a tool costs you less than $500, you can report its full cost. If it costs you $500 or more, add the cost to your CCA charts on Form T1175 as Class 8 property.

Small tools that cost less than $500 are fully deductible in the year you buy them. You may claim them as an expense at line 9820 or claim CCA by including them in Class 12 (with a CCA rate of 100%). Either method is acceptable, but do not claim the amount twice. For more information on CCA, see Chapter 4.

Line 9821 – Soil testing

Enter the amount of expenses you paid for testing soil samples.

Line 9823 – Licences/permits

Enter the total of annual licence and permit fees that you paid to run your business.

Line 9824 – Telephone

Do not deduct the basic monthly rate of your home telephone. However, you can deduct any long-distance telephone calls you made on your home telephone for farming business purposes.

If you have a separate telephone to use in your business and you use it for business calls only, you can deduct its basic monthly rate.

Line 9825 – Quota rental (tobacco, dairy)

Enter the amount of expenses you paid for quota rentals in the fiscal period.

Line 9826 – Gravel

Enter the amount of expenses you paid for gravel used to earn farming income in the fiscal period.

Line 9827 – Purchases of commodities resold

Enter purchases of commodities that you bought for resale and then sold. Enter the corresponding sales of commodities purchased for resale on Line 9612 – Resales of commodities purchased.

Enter purchases of commodities that you bought for resale but have not yet sold.

Line 9829 – Motor vehicle interest and leasing costs

Enter the leasing costs for your motor vehicle or the interest on the money you borrowed for a motor vehicle.

If you used a passenger vehicle or a zero-emission passenger vehicle to earn farming income, there is a limit on the amount of interest you can deduct. Whether you use the cash or accrual method to determine your income, fill in the following chart to calculate the interest you can deduct. If you used your passenger vehicle or zero-emission passenger vehicle for both personal and farming business use, fill in the chart before you determine how much interest you can deduct as an expense.

Leasing costs for a passenger vehicle (or a vehicle that would qualify as a zero-emission passenger vehicle if you owned it)

You can report costs you incur to lease a passenger vehicle you use to earn income. Include these amounts on line 9819.

When you use a passenger vehicle to earn farming business income, there is a limit on the amount of the leasing costs you can deduct. This limit does not apply to zero-emission passenger vehicles. To calculate your eligible leasing costs, fill in the Eligible leasing costs for passenger vehicles chart.

If the lease agreement for your passenger vehicle includes items such as insurance, maintenance, and taxes, include them as part of the lease charges on line 1 when you fill in the chart.

For your 2023 fiscal period, use the GST rate of 5% or the applicable HST rate of your specific province to fill in the chart below.

The following example shows how to calculate the eligible leasing costs. In this chart, we use prescribed amounts. Prescribed means it is written in the law.

Repayments and imputed interest

When you lease a passenger vehicle, you may have a repayment owing to you, or you may have imputed interest. If so, you will not be able to use the chart.

Imputed interest is interest that would be owing to you if interest were paid on the money you deposited to lease a passenger vehicle. Calculate imputed interest for leasing costs on a passenger vehicle only if all of the following apply:

• one or more deposits were made for the leased passenger vehicle
• one or more deposits are refundable
• the total of the deposits is more than $1,000

For more information, see Interpretation Bulletin IT-521, Motor Vehicle Expenses Claimed by Self-Employed Individuals.

Joint ownership of a passenger vehicle or a zero-emission passenger vehicle

If you and another person own or lease a passenger vehicle or zero-emission passenger vehicle, the limits on CCA, interest, and leasing costs still apply. If you and another person own or lease a zero-emission passenger vehicle, only the limits on CCA and interest apply. The total amount you (as a joint owner) or any other owners deduct cannot be more than the amount one person owning or leasing the vehicle could deduct.

Line 9936 – Capital cost allowance

Enter the amount of CCA you calculate on all the eligible assets used in your farming operation. To calculate your CCA claim, use the charts on Form T1175, Farming – Calculation of Capital Cost Allowance (CCA) and Business-use-of-home Expenses. For information on how to fill in these charts, see Chapter 4.

Line 9937 – Mandatory inventory adjustments – prior year

If you included an amount for the mandatory inventory adjustment (MIA) on line 9942 in your 2022 fiscal period, enter the amount as an expense on line 9937 in your 2023 fiscal period. Do not include the valuation of inventories if you are using the accrual method of accounting. For information about the accrual method, see Reporting methods.

For more information on MIA, see Line 9942 – Mandatory inventory adjustment – current year.

Line 9938 – Optional inventory adjustments – prior year

If you included an amount for the optional inventory adjustment (OIA) on line 9941 in your 2022 fiscal period, deduct the amount as an expense on line 9938 in your 2023 fiscal period. Do not include the valuation of inventories if you are using the accrual method of accounting. For information about the accrual method, see Reporting methods.

For more information on OIA, see Line 9941 –  Optional inventory adjustment – current year.

Line 9896 – Other (specify)

The expenses listed on the form are only the most common ones. If you have other farming expenses that are not listed on this form and are non-allowable for AgriStability, enter the total amount on line 9896. Then list the items on the blank lines provided under line 9896. For more information about other expenses, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Enter any overpayments you repaid for any of the programs identified on lines 9540 and 9544.

Summary of expenses

Copy Totals C, D, and E from the bottom of each of the three tables in the "Expenses" section of the form. Add the totals for your total expenses.

Summary of income and expenses

Line 9959 – Gross farming income

Enter your gross farming income from line 9959 on line 14099 of your income tax return. If you also completed Form T1164, add the totals from line 9959 on your Form T1163 and all your T1164 forms. Enter the result on line 14099 of your income tax return.

Line 9969 – Net income (loss) before adjustments

If you are a partner of a partnership, this amount is the net farming business income of the partnership. If the amount is negative, enter the amount in brackets.

Line 9940 – Other deductions

You can enter any business-use-of-home expenses that you are carrying forward from a previous fiscal period, as long as you meet one of the following conditions:

• the workspace is your principal place of business
• you use the space only to earn your farming business income, and you use it on a regular, ongoing basis to meet your customers

For more information, see Line 9934 – Adjustment to business-use-of-home expenses.

Line 9941 – Optional inventory adjustment – current year

If you want to include an inventory amount in income, read this section.

By making the OIA, you can include in your income an amount up to the fair market value (FMV) of your inventory minus the MIA. You can only make the OIA if you use the cash method. For the meaning of inventory and FMV, see Line 9942 – Mandatory inventory adjustment – current year.

For the OIA, unlike for the MIA, the inventory does not have to be purchased inventory. It is the entire inventory you still have at the end of your 2023 fiscal period.

Enter the amount of your OIA on line 9941. You must deduct this amount as an expense in your next fiscal period.

Line 9942 – Mandatory inventory adjustment – current year

The MIA decreases your net loss if you held inventory at the end of your fiscal period. Read this section even if you do not have to make the MIA. This section will show you how to determine the value of the farm inventory you bought and still have at the end of your 2023 fiscal period. You will need to know this value if you have to make the MIA this year or in the future.

You have to make the MIA if all of the following apply:

• you use the cash method to report your income
• you have a net loss on line 9969 of the form
• you bought inventory and still have it at the end of your 2023 fiscal period. This does not refer only to inventory you bought in 2023. It includes inventory you had previously bought and still owned at the end of your 2023 fiscal period

Your MIA is the lesser of these two amounts:

• the net loss before adjustments on line 9969
• the value of the purchased inventory you still have at the end of your 2023 fiscal period

To calculate your MIA, fill in Charts 1, 2, 3, and 4. Once you have filled in Chart 4, enter the amount on line 9942. For more information, see Interpretation Bulletin IT-526, Farming – Cash method inventory adjustments.

In your next fiscal period, deduct from your farming income the MIA you add to your net loss in your 2023 fiscal period.

To value your inventory, you need to know the meaning of the following terms:

Inventory is a group of items that a business holds and intends to consume or sell to its customers.

Farm inventory is tangible property that is:

• held for sale, such as harvested grain
• used in the production of saleable goods, such as seed and feed
• in the process of being produced, such as standing crops or feeder livestock

Seed you have already planted and fertilizer or chemicals you have already applied are no longer part of your inventory items but are included in the value of the standing crops that may be included in the OIA.

Purchased inventory is inventory you have bought and paid for.

Specified animals are horses. You may also elect to designate cattle you registered under the Animal Pedigree Act as specified animals. To make this choice, put a note on your income tax return saying you want to designate the animal this way. If you indicate on your return that it is a specified animal, we will continue to consider it as such until you sell it.

Cash cost is the amount you paid to buy your inventory.

Fair market value (FMV) – is generally the highest dollar value you can get for your property. We define this term in Chapter 4. 

Value of your purchased inventory

To value your purchased inventory, read the text that follows and the example of how to fill in the MIA charts. There are blank charts for you to use. Keep these charts as part of your records.

Except for specified animals, you have to value any purchased inventory you bought before or during your 2023 fiscal period at the lesser of these amounts:

• the cash cost
• the FMV

To determine which amount is less, compare each item or group of items separately in the inventory.

Value the specified animals you acquired in your 2023 fiscal period and still have at the end of this period at one of the following amounts:

• the cash cost
• 70% of the cash cost
• any amount between these two amounts

Value the specified animals you acquired before your 2023 fiscal period and still have at the end of this period at one of the following amounts:

• the cash cost
• 70% of:
  • the value of the specified animals for MIA purposes as determined at the end of your 2022 fiscal period, plus
  • any amounts you paid in your 2023 fiscal period toward the purchase price
• any amount between these two amounts

Partnership information – Your share of amount C

Enter your share of amount C or the amount from your T5013 slip. Fill in the Partnership information chart on your form.

Line 9951 – Return of fuel charge proceeds to farmers tax credit allocated to you in the year

This credit is considered to be government assistance that you received in the year and is taxable to you. Include in your income the amount of the credit allocated to you by the partnership (amount 5C of your Form T2043) in the same tax year in which you claimed the credit.

Line 9934 – Adjustment to business-use-of-home expenses

If you have claimed business-use-of-home expenses (including a carryforward from a previous year claimed on line 9940) in arriving at your net income (loss), and the amount on line 9944 is negative (a loss), you must make an adjustment on line 9934. Enter the lesser of the following amounts:

• the expenses you claimed from the business use of your home, including current-year expenses and any expenses you are carrying forward from previous years
• the amount of your loss on line 9944

This does not mean that you cannot use your claim for business-use-of-home expenses. In a future year, you can use any expense you could not deduct in your 2023 fiscal period, as long as you meet one of these conditions:

• the workspace is your principal place of business
• you use the space only to earn your farming business income, and you use it on a regular and ongoing basis to meet your customers

Use the chart on Form T1175 to calculate your allowable claim for business-use-of-home expenses. Be sure to include any part of the CCA that you claimed for the business use of your home.

For more information, see Income Tax Folio S4-F2-C2, Business Use of Home Expenses.

Line 9974 – GST/HST rebate for partners received in the year

If you received a GST/HST rebate for partners, enter the amount of the rebate that relates to eligible expenses other than CCA on line 9974, in the section "Summary of income and expenses" of Forms T1163 or T1164 in the year you receive the rebate.

In the chart "Partnership information," show the full names of the other partners, as well their percentages of ownership shares in the partnership.

Line 9946 – Net farming income (loss)

Enter your net farming income or loss on this line of your form. Also enter it on line 14100 of your return if:

• your fiscal year-end is December 31, 2023
• you did not file Form T1139, Reconciliation of 2022 Business Income for Tax Purposes, with your 2022 income tax return

If you have more than one farming operation or additional expenses that apply to partnerships, add the amounts from line 9946 of Form T1163 and Form T1164. Enter the total of these amounts on line 14100 of your income tax return.

If you have a loss, enter the amount in brackets. For more information about losses, see Chapter 5.

You may have to adjust the figure from line 9946 before entering it on your income tax return. You may have filed Form T1139, Reconciliation of 2022 Business Income for Tax Purposes, with your 2022 income tax return. If so, you may have to complete the same form for 2023. To find out if you have to file Form T1139, and calculate the amount of income to report on your 2023 income tax return, see Form T1139, Reconciliation of 2023 Business Income for Tax Purposes.

Partnership information chart

Partnership name

Enter the partnership's name.

Your percentage of the partnership

Fill in this chart if you are a member of a partnership.

Enter your own percentage share of the partnership.

Fill in all other partners' information on the lines below.

AgriStability and AgriInvest participant identification number (PIN)

Enter the PIN (if available) for each individual partner, corporate or co-operative partner.

Partners' names

Fill in the first and last names of each individual partner. If a corporation or co-operative is a partner, enter the name of the corporation or co-operative. If another partnership is a partner, list the names of the partners in that partnership.

Percentage (%) share

Enter each partner's percentage share based on the allocation of partnership net income or loss reported to us unless one of the following conditions is met:

• interest has been paid on the partners' capital
• salaries have been paid to partners

In these cases, exclude these amounts when you determine the partner's percentage share.

If another partnership is a partner, determine the beneficial ownership of each individual partner. See the following example.