How to Claim Medical Cannabis on your Income Tax Return

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Green bud, grey area: Medical cannabis consumers buy products directly from licensed producers, but they must pay for it out of pocket sometimes to the tune of hundreds of dollars a month. Medical cannabis normally isn’t covered by third-party health insurance plans as it doesn’t have a drug identification number (DIN), a regulatory stamp consent issued by Health Canada. 

Starting March 1, Sun Life will become the country’s first major insurance company to offer optional coverage for medical cannabis, but for many consumers the only opportunity for financial relief comes through the taxman. 

Both medical marijuana and marijuana seeds are on the list of appropriate medical expenses for tax purposes. Since September 2015, Canada Revenue Agency (CRA) has deemed medical cannabis purchased under a prescription as an allowable medical expense for legal medical cannabis patients.

In order for you to be entitled to claim your cannabis medicine and expenditure, you must have all of the receipts and all purchases must be made from an officially permitted and licensed medical cannabis producer such as Aphria.

The deduction for prescription medicines is allowed by ITA, but not for non-prescription or over-the-counter drugs even when they are recommended by a doctor. As it turns out, Health Canada’s Marijuana for Medical Purposes Regulation requires a prescription. Amendments to the ITA recognizing the MMPR have not yet been introduced due to this ambiguity have arisen.

“This is an important step in acknowledging the legitimacy of the way patients use medical cannabis, to help manage the symptoms of a range of health conditions,” said Neil Belot, Executive Director of the CMCIA. “To simplify this issue we have been working with the CRA for a number of months and the Department of Finance, and we’re tremendously pleased that cannabis regulated by Health Canada has been recognized as a permissible tax expense. It’s very good news, and will help make the use of cannabis as medicine more accessible and affordable for patients.”

 

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Expenses related learning disabilities

If you, your spouse or common-law partner, your child, or the child of your spouse or common-law partner has a severe learning disability or mental impairment, you may be able to claim costs related to those disabilities as medical expenses. Talking books, reading services, devices and software to accommodate people with learning disabilities, and tutoring services are all eligible expenses.

In order to qualify, the user of the device or service must be diagnosed with a severe learning disability or mental impairment by a qualified medical professional. Services such as tutoring must be provided by a qualified professional whom you pay. For example, you cannot tutor your child on your own and claim the theoretical expense as a deduction.

Federal Vs state income Taxes

Is there any way a frugal patient can work a medical marijuana tax deduction into their federal income tax? That’s in fact a pretty hard “no” on account of the perpetuated federal illegality of cannabis, even for medical use. But can you finagle a marijuana tax deduction as a medical expense in states that require state taxes?

That’s still pretty much a “no” but not solid steel “a” like you’d get from the federal government. Taxes can be brutally complex, especially when you begin to factor in wild cards like the “legal, not legal” ambiguity of marijuana.

Here are the steps to claim medical cannabis as a medical expense

  • >> On line 330 of Schedule 1, Federal Tax, enter the total amount that you, or your spouse or common-law partner paid in 2016 for eligible medical expenses.
  • >> On the line below line 330, enter whichever is less: 3% of your net income (line 236) or $2,237.
  • >> Subtract the amount of step 2 from the amount on line 330, and enter the result on the following line of Schedule 1.
  • >> Claim the corresponding provincial or territorial non-refundable tax credit on line 5868 of your provincial or territorial Form 428. For example, your prescription may be $8 a day, meaning a full year’s prescription could cost $2,920. The cost of the drug can be lower or higher, depending on dosage and type.

Again, you can claim medical expenses paid for yourself, your spouse or common-law partner and certain related persons. Total entitled medical expenses must first be lessened by 3% of your net income or $2,237, whichever is less. The tax credit is 15% of the amount left over.

Marijuana business taxes

Of course, the feds aren’t going to pass up the opportunity to collect money so while you may not benefit from a tax deduction, the IRS has strongly insinuated that marijuana businesses better be reporting their income, lawful or otherwise.

It’s like a reverse Sophie’s Choice in which, rather than kill something they love, businesses are instead forced to pick their own poison: attempted tax evasion or written confession of federally illegal activity to the IRS. If you’re dead set in the end, on seeking a medical marijuana tax deduction this year, your best choice is to either work with a tax professional that fully understands your state’s tax laws or goes directly to the source by contacting your state’s tax authority.

A marijuana tax deduction on state forms is an exact shot in the dark with the odds stacked against you. And, unfortunately, the only thing close to being as certain as death and taxes is the DEA’s refusal to acknowledge the medical benefits of marijuana.

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References:

  • Claiming Medical Cannabis Expenses on Your Tax Return via Aphria
  • How to claim medical cannabis on your income tax return By Jane Switzer via Lift News

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