Is Medical Marijuana Tax Deductible? IRS creates clarity

By Jelena Martinovic

As we all know, the marijuana industry has grown significantly in recent years, with sales projected to reach $25 billion by 2025.

Sales growth was fueled by more and more states legalizing the plant. In states like Illinois, 2021 cannabis sales grossed nearly $1.4 billion and surpassed liquor taxes by nearly $100 million over the same period, after topping them for the first time in February.

Photo by Scott Graham via Unsplash

However, because the facility is still illegal under federal law — something that could change if/if Senate Majority Leader Chuck Schumer (DN.Y.) and his colleagues table the long-awaited bill in April — conflict and ambiguity remain related to tax policy. which creates “significant problems” for IRS and financial regulators, not to mention cannabis operators and companies.

With tax season approaching, confusion has arisen over whether medical marijuana is tax deductible, writes Marijuana Moment.

In an interview with C-SPAN’s Washington Journal, IRS taxpayer attorney Erin Collins was asked by a caller from Nevada, where cannabis is perfectly legal, why he couldn’t find an option on TurboTax to deduct his cannabis purchases.

Collins, who was appointed during the Trump administration, said she would have to “plead ignorance on the marijuana issue” “unless you say it’s a medical conclusion.” If it’s a medical expense and then you have an option on your Schedule A, you might be able to put it there.

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“If it’s medical expenses and then you have an option on your Schedule A, you might be able to put it there,” she continued.

She was not exaggerating when she pleaded ignorance.

Photo by Rex_Wholster/Getty Images

Finally not deductible

In a statement to Marijuana Moment, Collins said medical marijuana purchases aren’t deductible after all.

“I had not previously looked into the state tax treatment of marijuana and speculated that marijuana could ‘possibly’ be deductible as medical expenses in certain circumstances,” Collins said. “After the program I checked the law. For the avoidance of doubt, medical marijuana is not tax deductible for federal purposes under current regulations.”

The IRS clarified that it does not have discretionary authority to issue policies that would allow cannabis-related deductions as long as the plant remains illegal under federal law.

This article originally appeared on Benzinga and has been republished with permission.