While Canadian tax filings were due on June 1, 2020, the Canada Revenue Agency (CRA) has provided taxpayers with some leeway amid the COVID-19 pandemic. The CRA will not levy penalties if you pay your taxes before September 1, 2020. Here, we look at three lesser-known CRA medical tax breaks.
According to the CRA, you can claim the total of the eligible expenses minus the lesser of the following amount:
- $2,352 or
- 3% of your net income
For example, if your medical expenses for 2019 stand at $2,500 and your net income is $60,000, you can deduct $1,800 from your medical expenses and receive a credit of $700.
In order to claim certain travel expenses as medical expenses, you need to prove that equivalent medical services were not available near your residence and you took a reasonably direct traveling route. Further, if a medical practitioner certifies in writing that you are unable to travel alone, you can claim transportation and travel expenses of an attendant as well.
Gluten-free food products
Canadians suffering from celiac diseases can claim the incremental costs associated with buying gluten-free products as medical expenses. The incremental costs are the difference between gluten-free products and the cost of similar products with gluten.
You can claim the amount paid for cannabis, cannabis plant seeds, cannabis oil, or cannabis products purchased for medical purposes from a licensed producer. The patient will require a medical prescription and should be registered as a client of the producer.
The medical marijuana industry is expected to grow at a rapid pace, as several countries are looking to legalize these products. While you can reduce taxes paid to the Canada Revenue Agency by including medical marijuana expenses, you can also benefit from long-term gains by investing in companies such as Charlotte Web Holdings (TSX:CWEB).
CWEB stock went public back in September 2018 and closed trading at $15 on September 1 that year. Shares then doubled to $30.1 in 2019 before losing significant momentum to trade at the current price of $4.86.
The stock has been trading in the red recently, as it issued new shares to raise $67.5 million. The offering was priced at $6.75 per share, and the company issued 10 million shares. While the offering diluted shareholder wealth, it was also below the stock’s trading price of $7.32 that accelerated the sell-off.
Several cannabis companies have been grappling with mounting losses and cash burn, which means they have to constantly raise capital. Charlotte ended the March quarter with US$53 million in cash, down from US$68.6 million at the end of 2019. In the first three months of 2020, the company burned through almost US$15 million from day-to-day operating activities.
However, CWEB is also one of the top players in the medical marijuana space and is a trusted brand. The stock has a market cap of $674 million, indicating a forward price-to-sales multiple of four and price to book value of 4.1, making it a top buy for value and contrarian investors.
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The Motley Fool owns shares of and recommends Charlottes Web Holdings. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.