Taking cannabis for a host of medical conditions can be an expensive proposition. The legal version of marijuana is taxed, not often covered by health insurance plans and comes at a higher cost than the illicit market variety. So, it’s nice to hear that you may be able to claim medical marijuana on your tax return.
That’s the good news. The bad news is that even if you consume cannabis for medical reasons, if you don’t have a prescription, then you’ll get no tax relief.
“The only way you can claim cannabis as an expense on your return is if it is for medical reasons, and you have a valid prescription from a medical professional that says you require it, and you’ve bought it legally,” says Jamie Golombek, CIBC’s managing director of tax and estate planning, in an interview with Yahoo Finance Canada.
One of the reasons that it’s hard to get coverage for medical marijuana by third-party insurers is that it hasn’t yet received regulatory approval from Health Canada, in the form of a Drug Identification Number. That said, last year, Sun Life became the country’s first large insurance company to offer optional coverage for medical marijuana. And Manulife, in partnership with Shopper’s Drug Mart, also provided optional coverage for certain individual and group plans.
The Income Tax Act Is Strict on the Deductions for Medications Allowed
The Canadian Income Tax Act allows for deductions for prescription medicines, and the Canada Revenue Agency (CRA) acknowledged in 2015 that this also covered prescriptions for medical marijuana purchased from a licensed producer.
However, over-the-counter medicines and natural medicines, including vitamins, aren’t covered, even if they’re recommended by a doctor. Tax lawyer David Rotfleisch of Rotfleisch & Samulovitch Professional Corporation feels that the CRA definition of health-related expenses is still too limited, and that even over-the-counter medications should be included.
“Cold remedies are clearly effective in alleviating cold symptoms, but don’t qualify as medical expenses,” he said in an interview with the Financial Post. “It seems to me that this is an area that needs a loosening of the rules by CRA.”
When it comes to medical marijuana, you can claim what you paid for fresh or dried cannabis, cannabis oils, and cannabis seeds and plants from a licensed producer. But you can’t deduct costs related to growing cannabis or accessories such as:
- Containers and other storage
It goes without saying, or should, that you need to have receipts for any medical marijuana purchases, in case of an audit or review. Producers are legally obliged to provide them, whether they’re paper or digital ones.
How to Make Your Medical Cannabis Tax Claim
To file a tax claim for medical marijuana, you add up the amounts on your receipts and include this total onto any other medical expenses you’re claiming on your T1 Income Tax and Benefit Return.
You don’t have to calculate medical expenses by the calendar year, but you can use any 12-month period ending in the current tax year. If you do your own taxes using tax software, you’ll enter your medical expenses in the deductions and credit area. Or, if a professional does your taxes, simply give your receipts to them.
As for how your deduction is figured out, that’s where it gets a bit complicated. You can claim the total value of your medical expenses (cannabis included), minus either $2,268 or 3% of your total net income, whichever amount is lower.
Showing that it has a sense of humour, tax-preparation service H&R Block explains how this could work:
“For example, Mary Jane’s income was $50,000 in 2018 and her medical expenses (including medical cannabis expenses) were $4,000.
“In Mary Jane’s case, 3% of her total income comes out to $1,500 ($50,000 x 3%). Since this is less than $2,268, Mary Jane will need to subtract $1,500 from her total claimable medical expenses ($4,000 – $1,500 = $2,500 in medical deductions).
“However, medical expenses are a nonrefundable tax credit. That means the amount you actually get in credits is 15% (federally) of the amount you claim. So, while Mary Jane is claiming $2,500, only $375 (15% of $2,500) will be applied to her total tax payable.”
H&R Block also points out that medical marijuana is taxed at 10% and is also subject to HST/GST at point of sales. But these government cash grabs can also be part of your claim.
To find out more about how to claim medical marijuana as an expense on a tax return, see the lines 330 and 331 page on the Canadian Revenue Agency website.
Also keep in in mind that every province and territory has its own tax laws and policies, so you need to check how they’re handled in your area. For example, in Quebec, residents file both a provincial income tax return with Revenu Québec and a federal return with the CRA, while the rest of the country just does one through the CRA.
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