Tax & Accounting June 05, 2019

Cost of growing medical cannabis not eligible for medical expense tax credit

In a new technical interpretation (2018-0777751E5), the CRA provided some interesting guidance on claiming the medical expense tax credit ("METC") with respect to medical cannabis that is grown by the consumer. Currently, s. 118.2(2)(u) of the Act provides that amounts paid for prescribed medicinal cannabis, plants, seeds, or oil for the patient's own use are eligible for the METC so long as the taxpayer is authorized to possess the cannabis and acquires the cannabis, both in accordance with specific legislation. However, Bill C-97 proposes to amend s. 118.2(2)(u) so that it will only require the taxpayer to possess a "medical document" to support their cannabis use, effective October 17, 2018. Note that the wording of this provision only allows a taxpayer to claim the cost of the seeds, and does not specifically include other costs of growing cannabis for medical purposes.

In the technical interpretation, the CRA commented on whether certain goods and services relating to the growth and production of cannabis for medical purposes would be eligible for the METC. Services relating to the supply, growth, or production of cannabis are eligible for the METC only if the services are medical services that are a diagnostic, therapeutic or rehabilitative service that is performed by a medical practitioner acting within the scope of his or her professional training. I'm no expert on what cannabis cultivation services are on the market, but it's probably unlikely that a doctor or nurse would offer such a service acting within the scope of their professional training.

As mentioned above, the cost of the seeds is eligible for the METC under s. 118.2(2)(u), but the other costs related to cultivation are not included in this provision. The CRA also opined on the matter of eligibility for costs such relating to pots, soil, nutrients, lights, nitrogen, grow boxes, and electricity used. These types of costs are not provided for in the Act, and as such are not eligible for the METC.

Cameron Mancell
CFP®, Senior Technical Writer at Wolters Kluwer Canada
Cameron Mancell, CFP®, is a Senior Technical Writer at the Wolters Kluwer office in Toronto. Cameron contributes to Canadian Tax Reporter, Preparing Your Income Tax Returns, and Preparing Your Corporate Income Tax Returns, among several others.
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