Indiva Guides - Jan 25, 2019

Claiming Medical Cannabis Expenses on your Income Tax Return

It’s that time of year again – TAX TIME!

The month of April is often associated with more than just unpredictable weather. It’s also permeated with a need to scramble and get all our earnings and deductibles accounted for so we can deliver an accurate income tax return.

One question we’ve heard a lot is if medical cannabis can be claimed on your 2018 income tax return. Fortunately, the answer is YES!

The Canada Revenue Agency (CRA) allows deductions to be made for a whole list of medical expenses.  This includes hospital fees, prescriptions, and medical cannabis. This is great news, as most third-party health insurance companies do not offer coverage for medical cannabis, leaving patients to carry the burden of the expense.

Being able to claim these expenses on your tax return is a boon to many and can really make a difference financially.

Eligibility

In order to deduct medical cannabis expenses on your income tax return, a valid prescription from a health practitioner is required. Also, only medical cannabis purchased from a Health Canada approved licensed producer is eligible for deduction.

What is deductible?

The total amount you paid for your medical cannabis over any 12-month period ending in 2018 can be claimed. Cannabis products that can be deducted include dried flower, oils, plants and seeds.

Accessories such as infusing machines, vapes, storage items or growing accessories (pots, soil, lights, fertilizer etc.) are not eligible as deductions.

Canadian taxpayers are allowed to deduct the total value of their medical expenses (eligible cannabis expenses included) over a 12-month period, minus either $2,268 or 3% of your total net income (after taxes) – whichever amount is less.

Be aware that the amount of credit you will receive changes drastically, depending on your income and the amount of expenses claimed.

Example

If your income was $60,000 for 2018 and your medical expenses (eligible medical cannabis expenses included) totalled $4,000:

$60,000 x 3% = $1,800

As $1,800 is less than $2,268 we use:

$4,000 – $1,800 = $2,200

This means that you are eligible to claim a deduction of $2,200 on your 2018 income tax return.

What is required to make a deduction?

To verify your deductions are accurate, valid receipts from your Health Canada approved licensed producer are required. These do not need to be filed with your tax return but it is recommended to keep all tax receipts for a period of 6 years as proof of purchase in case of a tax audit.

Retrieving these receipts should be as easy as logging into your patient profile on your LP’s website and downloading or printing your order history.

How to apply for the deduction

Once you have totaled your medical cannabis expenses for a 12-month period, you can add them to any other eligible medical expenses you will be claiming on your T1 Income Tax and Benefit Return.

If you are filing your own taxes or using some form of tax software – the fields to list your medical expense deductions are labeled accordingly. If you are using a professional tax return service, simply provide your receipts and they will take care of it.

Remember, while only one tax return form must be submitted to the CRA, each province and territory in Canada has different tax laws and policies. Quebec excluded, all provinces and territories allow the federal government to collect income taxes and distribute tax returns.

Quebec residents must file a provincial income tax return with Revenu Quebec and another federal return with the Canada Revenue Agency.

Please remember that your 2018 income tax return is due by April 30th, 2019.

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