Fishers report their income to the Canada Revenue Agency as if they are self-employed individuals. To claim all of the deductions and credits you deserve, it’s important to understand the filing process. It’s also recommended to be aware of the CRA’s special rules for fishing losses.
Self-Employed Fishing Income and Expenses
When you file your return as a self-employed individual, you have to report all of the income you earn through your business. However, you can deduct related expenses from this income.
As a fisher, you must report all income from saltwater fishing, inland fishing and animal aquaculture. If you received grants, subsidies or compensation for losses, you have to report these amounts as income as well.
Expenses include any costs you incur while trying to earn profit for your fishing business. This includes a range of expenses, such as fishing hooks and lines, costs associated with your home office, and expenses incurred when you buy a boat or other property.
However, certain expenses — such as boats and other property — must be claimed in increments. When you purchase a large depreciable property for your business, the CRA assigns it a Capital Cost Allowance rate. This rate determines the fraction of the expense you may write off each year.
If you dispose of capital property such as boats, crab shacks, equipment or similar assets, you have to report the disposition. If you have any capital gains or losses, you have to report these, as well.
If you dispose of a property that you have already fully deducted, determining your gain or loss is fairly straightforward. You subtract the original cost of the asset, the cost of capital improvements, and expenses related to selling it from the proceeds of the disposition.
However, if you dispose of a property while you are in the midst of claiming its CCA, you have to take a few extra numbers into consideration.
Namely, you need to look at your notice of assessment from the CRA to determine your unclaimed capital cost (UCC), which is the amount of the asset’s price you have not yet deducted on your income tax returns. If the UCC is less than the proceeds of the disposition (usually the sale price), the CRA needs to recapture some of the CCA that you have claimed. As a result, you need to report the recapture as income.
If the expenses for your fishing business exceed your income for the year, you have a fishing loss. You can claim fishing losses against other types of income. However, if you don’t have any income to use the loss against, you can carry fishing losses back three years or forward 20 years.
Accrual and Cash Accounting
You can track your fishing income and expenses using either accrual or cash accounting. Under the accrual method, you report income and expenses as they accrue. Under the cash method, you report them when cash exchanges hands.
For example, if you agree to sell some fish, you would report income when you agree to the sale under the accrual method. However, under the cash method, you report the income when you receive the payment.
References & Resources
- TurboTax: Reporting Fishing Income
- TurboTax: Fishing Income and Business Explained
- TurboTax: T2121 Tax Form: Statement of Fishing Activities in Canada
- TurboTax: Switching From the Cash to Accrual Accounting Method