Claiming medical cannabis on your taxes in Canada

Published Oct 21, 2020 09:00 a.m. ET
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If you procrastinate and put off filing taxes like so many other Canadians do, this time of year can be stressful and full of confusion. A simple tax return that includes only your basic income is easy to complete, but when it comes to claiming other expenses in life, most aren’t sure where to start or what all qualifies, and one of the topics that are the least understood is cannabis.

Here, we set out to help by answering all of the Canadian medical cannabis tax questions that we could find, including what qualifies as a claimable expense, how you can see a return, and what all you need to be able to qualify to claim. Followed by some friendly advice that should keep you out of trouble with the CRA, should you ever be faced with an audit.

Is medical cannabis deductible in Canada?

If you were hoping to claim medical cannabis expenses on your taxes this year, then you’re in luck because, in Canada, most medicinal pot products qualify as expenses. Included in the list of cannabis products that can be claimed are flower, seeds, concentrates, edibles, vape juice, topicals, capsules, and oil, but these aren’t the only things that can work as deductibles.

What about the accessories?

Buying medical cannabis products can get expensive, but for users who require or prefer a specific method of ingestion, it is often the accessories that break the bank, as they are large initial purchases that may last. However, they’re difficult for some people to afford. Luckily, claiming medical cannabis accessories is also allowed in Canada, which means that you’re vaporizer, bong, pipe, joint holder, grinder, or rolling papers can earn you a tax credit too.

Is there a maximum amount?

Though it would be nice to be able to claim unlimited medical cannabis purchases, there is a limit in Canada, and it depends on you’re income. Every Canadian medicinal patient is entitled to claim their total of eligible marijuana expenses, minus 3% of their total income, or up to $2352. Whichever amount is less is what you can qualify for, and that’s a fair chunk of yearly expenses either way.

The in’s and outs of this non-refundable tax credit

Canadians are fortunate to benefit from some incredibly generous tax credit programs that provide an income supplement in the form of a rebate check for money spent on various eligible expenses. However, this case, medical expenses typically transfer as non-refundable tax credits, which means that they will help to reduce the amount that you owe at the end of the year, rather than to offer a payout in the form of a cheque.

The Refundable Medical Expense Supplement

Most Canadians will benefit from the non-refundable tax credit, but in some situations like you might qualify for the Refundable Medical Expense Supplement. The RMES is currently available for low-income individuals that endure high medical costs each year. This refundable tax credit is either $1248, or 25% of your total yearly income, whichever is less, and it is reduced by 5% of your net income before it is paid out.

So if you made $37639 in gross income last year, then your maximum tax credit would be $500, and if you were to bring in $52599 in gross revenue, then you would be making too much to qualify for this type of tax credit. It is also important to note that you cannot claim both of the mentioned credits from this article on one return, and that is why we highly recommend doing the math before deciding which one might work best for you.

There is a catch

Before you get too excited, all medical cannabis patients must realize that there are limits on who qualifies, so you can’t just claim to have a medicinal need for pot to have part of your expenses covered. For your costs to qualify as a deductible, you must be registered with a medical cannabis producer. Once you are, even regular dispensary purchases may be deemed as eligible medical expenses, so don’t forget to take this critical step if you want to take advantage of either tax credit.

Stay vigilant and accurate

To get the most out of these Canadian tax credits, couples should have the lower-income spouse make the claim, and everyone who plans on claiming medical cannabis should keep rigorous records on purchases with dated receipts. Though you might not be asked to show evidence to make a claim taxes are sent in, especially if you’re filing online, the CRA is known to be rather strict when it comes to medical claims, so it’s always better to be safe rather than sorry.

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