With Canada now raking in up to $100 million per year in pot taxes, some of that revenue will soon be heading right back to pot users in the form of cannabis-specific tax receipts.
The only catch? Pot-smokers have to have permission from a physician indicating that they’re toking for medical reasons.
Cannabis is one of the myriad of categories that the Canada Revenue Agency has authorized as a permitted medical expense. The tax agency, which prefers the somewhat outdated spelling of “medical marihuana,” considers pot as no different than braille printers, glass eyes or oxygen tents.
However, tax-filers will be required to show evidence of a prescription. Even if a Canadian swears by cannabis for treating their sleep apnea, the CRA isn’t going to care unless they can provide a doctor’s note.
Medical cannabis users also need to buy their product from a licensed producer. As a general rule, the CRA doesn’t let you write off anything purchased on the black market.
CRA rules also exclude the reams of dispensaries who, prior to legalization, handed out dubious prescriptions from naturopaths.
It’s similar to the way the CRA decides whether to write off a gluten-free diet. If a taxpayer can provide a doctor’s note provide proving they have celiac disease, they are allowed to claim the “incremental cost” of gluten-free bread versus regular bread. If the taxpayer is merely going gluten-free to be trendy, however, they pay full price.
Over-the-counter drugs are similarly denied tax relief, even if they are indeed legitimate medical expenses. A Canadian may require cold relief drugs or skin creams to function, but they can’t claim it against their taxes unless someone with a med school diploma has given them the go-ahead.
Still, even authorized medical marijuana users can’t expect to deduct the full value of whatever they’ve paid for their prescribed pot. As with all medical expenses, Canadians must calculate the full value of all the medical pot they’ve purchased and then subtract either $2,268 or 3 per cent of their net income
Medical marijuana has been eligible as a tax deduction for roughly 10 years, although the CRA confirmed as much in 2015 with a letter to the Canadian Medical Cannabis Industry Association.
Prior to legalization, however, it was arguably much easier for auditors to check if a cannabis write-off was above board, since no cannabis could be purchased legitimately in Canada without medical authorization.
The tax situation is much more complicated in the United States. Even in states that have legalized medical marijuana, it is not eligible as a medical write-off because the United States federal government, and thus the Internal Revenue Service, still considers cannabis illegal.
Of course, that’s proven no barrier to the IRS collecting billions in taxes from U.S. cannabis dispensarie
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