The Canada Revenue Agency has confirmed that medical cannabis purchased under prescription is an allowable medical expense at tax time.

The CRA sent a letter to the Canadian Medical Cannabis Industry Association last month confirming cannabis from a licensed producer qualified as a medical expense.

The CRA was responding to a letter sent earlier this year by the CMCIA, the industry association for licensed producers of medical cannabis, asking for a ruling on the issue, according to association spokesman Cam Battley.

The CRA website includes medical marijuana and marijuana seeds on its list of eligible medical expenses.

A CRA spokeswoman said today the Income Tax Act has recognized amounts paid for medical marijuana as a medical expense for almost a decade. 

"This is an important step, because it allows patients to write off a major component of their health-care costs," Battley told CBC News.

While the allowable medical expense is a complicated formula that is calculated based on taxable income, the cost of legally licensed marijuana can be high, meaning many who use the drug under prescription may be eligible. Often taxpayers need to reach a high threshold of allowable medical expenses to qualify for any tax relief.

Battley estimated an average cost per patient of about $7.60 a day, meaning a full year's prescription could cost  $2,774. The cost of the drug can be lower or higher, depending on dosage and type.

Health Canada moves against storefront dispensaries

Earlier this week, Health Canada sent out cease-and-desist letters to 13 unlicensed marijuana dispensaries demanding they shut down immediately.

It threatened raids by the RCMP unless the dispensaries submit a written statement by Sept. 21 confirming they have ended the practice of dispensing marijuana.

The threat carries through on Ottawa's warnings that it will not tolerate storefront dispensaries.

The CMCIA is continuing its campaign to normalize the use of cannabis from licensed producers with a legal prescription from a doctor.

Battley said the next objective of the CMCIA is to achieve broader coverage of cannabis prescriptions by private insurers.

He said the group has opened discussion on the issue with the insurance industry and found it "Surprisingly open and willing to have a conversation."

Lobbying for private insurance coverage

"I think that's because they know it's here to stay. This is not flash-in-a-pan…it's something around which there is a parallel regulatory system It's a true prescription drug and it's here to stay," he said.

Earlier this year, Sun Life agreed to pay for a University of Waterloo student's medical marijuana prescription through his student health plan after the student union went to bat for him. Jonathan Zaid uses the drug to combat a syndrome called new daily persistent headache.

"This is an offset for the insurers to pay for medical cannabis as his regimen of medical cannabis was cheaper than his regimen of prescription drugs," Battley said.

Battley said employers may also be receptive, as it is a question of getting people back to work after an illness.