How to claim medical cannabis on your income taxes

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Access and cost are two familiar pain points for medical cannabis clients. Even with a doctor’s authorization to use it, medical cannabis isn’t covered by many provincial drug benefit plans, disability benefits or private insurance, which can cost up to thousands of dollars per year. But come tax filing season, the Canada Revenue Agency (CRA) offers some reprieve: If you’re registered to buy medical cannabis from a licensed producer, you can claim the cost of your dried flower, oil, seeds or other products as a “medical expenses” credit on your annual income tax return.

What does it mean to “claim” medical cannabis?

If you earn income, you (presumably) pay income tax. When you file your T1 Income Tax and Benefit Return (the most basic tax form filed by individuals every year), you can claim certain deductions, credits and expenses that either reduce the amount of tax you pay or generate a refund.

Medical cannabis falls under “medical expenses,” a broad category that includes more than 100 eligible expenses such as cochlear implants, insulin pens, fertility-related procedures and laser eye surgery. Medical expenses are a non-refundable federal tax credit, which means any credit you receive reduces the amount of federal tax you have to pay, but won’t generate a refund if the credit exceeds the amount of tax owed. So, it’s not quite a direct rebate on the money you spent, but it means you’ll pay less tax on the money you earned.

Who can claim medical cannabis?

According to the latest data available from Health Canada, there were 369,614 active medical client registrations with licensed producers and 29,193 individuals registered to cultivate their own cannabis for medical purposes as of September 2019 — that’s 1.3 per cent of Canada’s adult population (roughly 30.3 million people age 18 and older).

The CRA lists three pieces of criteria for eligibility: You must have an authorized medical document; you must be a registered client of a producer licensed for sale by Health Canada; and you must buy your product from the licensed producer you’re registered with. Licensed producers are legally required to issue receipts, which you’ll need to calculate your total medical expenses. In general, the CRA recommends keeping all receipts for six years in case you’re audited.

What exactly can you claim?

Right now, it’s pretty strict: You can only claim the amount paid for dried cannabis, cannabis oil, cannabis seeds or other products purchased from a licensed producer for medical purposes. That’s it. You can’t claim anything related to growing or accessories, such as lights, soil or vaporizers.

How is the tax credit calculated?

First, tally up all of your eligible medical expenses for the last year. It doesn’t have to be the last calendar year, but any 12-month period ending in the current tax year. If you’ve claimed an expense on your taxes before, you can’t claim it again.

To calculate your credit for the 2019 tax year, take your total medical expenses and subtract the lesser of $2,352 or three per cent of your net income (your income after taxes). For example, if your annual net income is $45,000, three per cent of that would be $1,350 (which is less than $2,342). You then subtract that three per cent — $1,350 — from your total medical expenses. If you had a total of $2,000 in medical expenses, for example, you would receive a credit of $650.

If you’re doing your taxes yourself, medical expenses can be found on lines 33099 and 33199 of your T1 Income Tax and Benefit Return form. You should be prompted about medical expenses if you use tax software, or you can hand over your receipts to whoever prepares your tax return.

Why doesn’t insurance cover medical cannabis?

Some insurers do, but it’s not widespread and is usually only for covered for a limited number of conditions such as cancer, multiple sclerosis, HIV/AIDS or palliative care. Medical cannabis coverage is also generally excluded from provincial drug benefits or disability programs. Medical cannabis is treated differently because it doesn’t have a Drug Identification Number (DIN), which is issued by Health Canada after evaluation and testing. Without a DIN, insurers don’t have that regulatory A-Okay to codify cannabis and pharmaceuticals the same way.

Employers can request coverage for their group benefit plans, or allow medical cannabis as an eligible expense under a personal spending account, which gives plan members a set amount per year (say, $500) to cover a wider range of health and wellness expenses of their choosing. If you have insurance through your employer, check your benefits booklet — it might not be highlighted, but medical cannabis might be covered. If your insurance plan does cover the cost of medical cannabis and you’ve been reimbursed for it, you can’t claim that amount on your taxes.

Can you claim the cost of recreational weed?

Nope. As the name implies, it’s only for medical expenses deemed eligible by the CRA. Sorry! And just a reminder: income taxes are due by April 30, 2020, or June 15 if you’re self-employed.

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