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How to Claim Medical Cannabis on Your Taxes

Did you know that in Canada medical cannabis can be deducted from your income tax? Find out if you qualify and learn how to make a claim for tax relief.

Medical cannabis can be an expensive form of relief. Although it’s been legal in Canada since 2001 and has well-documented therapeutic benefits, it’s still struggling to be treated as legitimate medicine. One big hurdle is that Health Canada hasn’t assigned a DIN (drug identification number) to cannabis flower, oils or capsules. This means that most insurance companies won’t cover the costs, though a few are beginning to cover cannabis for specific conditions, such as cancer, HIV/AIDS, epilepsy, and arthritis. That leaves most people who rely on cannabis for doctor-prescribed relief on their own to pay for their medicine. According to Health Canada, medical users consume an average of 10-20 grams per week. The Arthritis Society says patients can expect to spend upwards of $1,875 per year. That’s a significant chunk of change.

Luckily, the Canada Revenue Agency offers some support. Prescribed cannabis is considered a medical expense and the more you spend on it relative to your income, the more you can deduct.

How do you claim medical cannabis on your taxes? 

There’s a threshold amount for medical expenses which you are expected to shoulder on your own. The amount changes every year. For 2018, it’s 3% of your net income up to a maximum of $2,302. Whatever you spend above your threshold is claimable.

To calculate your claim, first, you figure out your threshold. Then you subtract your threshold from your medical expenses. Whatever’s left is the amount you can claim on your taxes.

 Here’s an example:

If you earned $40,000 (after tax) in 2018, and spent $3,000 on medical expenses: 
$40,000 x 3% = $1,200 / This is your threshold amount
$3,000 - $1,200 = $1,800 / This is the amount you can claim 

The smaller your income, the smaller your threshold and the more of your expenses you can claim. CRA recommends that you calculate whether you or your spouse would benefit more from the medical expense. Anyone who earned more than $76,734 after tax will use the maximum threshold amount of $2,302. 

Where do you enter your medical expenses on your tax return?

There are two lines on your federal tax return where you enter medical expense information.

Line 330 of Schedule 1 (Federal Tax Return):

● Top line: Enter the total medical expenses for you, your spouse, and your children under 18.
● Middle line: Enter your threshold amount.
● Bottom line: Enter the amount you are claiming (that is, expenses minus threshold).

 There are additional lines on your provincial income tax forms where you can enter your medical expense amounts. Look for line 5868 of your provincial or territorial Form 428. 

Did you know: you can claim medical expenses for other dependents?

If you have paid medical expenses for other eligible dependents (such as parents, grandparents, or children 19 or older), complete Line 331 of Schedule 1 with the appropriate expense totals and the dependent’s threshold (i.e., 3% of their income). 

Do you qualify to claim medical cannabis costs for 2018?

If you meet these criteria, you can file a claim:

● You have spent more than your threshold amount
● You have receipts from a licenced medical producer
● You are only claiming the costs of cannabis flower, oils, capsules, seeds and plants

Did you know?

You can add up all of your medical expenses (not just for cannabis) to get over your claimable threshold. It’s worth the effort to find out if you have any other qualifying costs. Some common ones are travelling for medical treatment or the portion of other prescriptions not covered by insurance. 

Visit the CRA’s medical expense pages to find out what medical expenses are eligible and what special rules apply to each item. (If you’re looking for medical cannabis on the CRA site, it’s filed under “medical marihuana.”) 

FAQ #1: Do I need to send in my receipts or prescription with my tax return? 

You don’t need to send the receipts with your tax return, but you do need to keep them on file. The CRA can ask for them during an audit and, if you claim medical expenses, you’re much more likely to get audited. The CRA recommends that you keep your receipts for six years to produce for them on request.

Your receipts should show two things:

● You purchased from a licenced medical producer (therefore you have a prescription)
● You are only claiming the cost of cannabis flower, oil, capsules, seeds or plants

There are two places to get your receipts:

● Save the packing slip in the delivery from your medical LP
● Print off your order history from your medical LP’s website

FAQ #2: Can I claim the cost of my vaporizer, pipe, papers, growing materials, capsule fillers, or other equipment that I need to grow or use my medical cannabis?

Unfortunately, supplies and equipment for medical cannabis are generally NOT claimable. The only exceptions are two medical-grade vaporizers that have been registered with Health Canada by a company called Storz & Bickel: 

● The Volcano Medic (a tabletop vaporizer)
● The Mighty Medic (a handheld vaporizer)

These pieces are expensive, so decide for yourself whether the medical expense claim is worthwhile. You can view the Health Canada registration record for these vaporizers

FAQ #3: If I have insurance coverage for my cannabis, can I still claim it on my taxes? 

Generally, you can only claim a tax deduction on the amount that was not reimbursed by your health insurance or health expense account.

However, if you were reimbursed by a health expense account, but the account was filed as a taxable benefit, then you can include that in your medical expense claim to get the tax back. Not sure if this applies to you? Check with your health expense account administrator or look for the CRA’s guidelines on which medical expenses can you claim?

Summary 

Claiming your medical cannabis on your taxes takes a little research and organizing, but it can pay off. A quick calculation of your threshold amount and an estimate of your annual cannabis spend will let you know whether it’s worth your effort. Until more insurance companies cover prescribed cannabis as medicine, this tax deduction will be an important financial support for patients who qualify.