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How to Claim Medical Cannabis On Your Income Tax Return

Recreational cannabis is now legal, but the number of Canadians seeking pot for medical purposes is on the rise: Health Canada reported 330,758 registered clients at the end of June 2018, up 1,282% from 23,930 in June 2015.

Financially, medical consumers are in a tough spot: they’re required to buy products directly from licensed producers, but third-party insurance plans generally won’t reimburse the cost because medical cannabis doesn’t have Health Canada’s regulatory stamp of approval in the form of a Drug Identification Number. This means patients must pay out of pocket, sometimes spending up to hundreds of dollars each month.

Medical cannabis is prescribed to treat a number of medical conditions including as a natural remedy for migraines, glaucoma, chronic pain and anxiety. However, only a handful of insurers in Canada offer optional coverage through workplace benefit plans — and it’s usually only for more serious conditions such as cancer, HIV/AIDS, rheumatoid arthritis, multiple sclerosis, or patients in palliative care.

However, the Canada Revenue Agency (CRA) allows for medical cannabis to be claimed as a “medical expense” deduction on your federal income taxes, the same way you can claim the cost of hearing aids, insulin, or a wheelchair. Here’s how it works.

Who qualifies: Anyone with a prescription from an authorized medical practitioner to purchase cannabis from a licensed producer. Producers are legally required to issue receipts, so hold onto the paper copies or find out how to access receipts online — you’ll need them when it’s time to file your taxes. In general, the CRA recommends keeping receipts for six years in case of an audit or review.

What you can claim: The amount paid for fresh or dried cannabis, cannabis oils, and cannabis seeds and plants procured from a licensed producer. You cannot claim costs related to growing or accessories such as lights, containers and other storage, fertilizers, vaporizers, pipes, capsules, etc.

How to file: Use your receipts and tally up the amount you spent on medical cannabis, and add the total to any other allowable medical expenses you plan to claim on your T1 Income Tax and Benefit Return, the most basic form filed by Canadians to complete their individual income tax return. Medical expenses don’t have to be calculated by the calendar year, but by any 12-month period ending in the current tax year. If your return is prepared by a professional, submit your receipts to them. If you use tax software, you’ll be asked to enter your medical expenses in the deductions and credits section.

What gets deducted: Your total eligible medical expenses minus the lesser of $2,268 or 3% of your income after taxes (aka your net income). Here are three examples using different incomes and the same $2,500 in medical expenses:

  • If your net income is $70,000, you must deduct $2,100 from your total medical expenses. You will receive a credit of $400.
  • If your net income is $55,000, you must deduct $1,650 from your total medical expenses. You will receive a credit of $850.
  • If your net income is $30,000, you must deduct $900 from your total medical expenses. You will receive a credit of $1,600.

Each province and territory has different tax laws and policies, but the majority of taxpayers in Canada only have to submit one return through the CRA. The exception is Quebec, where residents file both a provincial income tax return with Revenu Québec and a federal return with the CRA.

Lift & Co. helps Canadians explore, understand, and make better-informed decisions around cannabis strains and licensed producers through events, content, data insights and cannabis reviews.