As we all know, the marijuana industry has grown substantially in recent years, with sales expected to hit $25 billion by 2025.
Revenue growth has been driven by more and more states legalizing the plant. In states like Illinois, cannabis sales pulled in nearly $1.4 billion in 2021, exceeding liquor taxes by nearly $100 million over the same period, after outpacing it for the first time in February.
However, with the plant still illegal under federal law - something that might change when/if Senate Majority Leader Chuck Schumer (D-N.Y.) and his colleagues file the long-awaited bill this April - conflict and ambiguity regarding the tax policy persist, creating "significant problems" for IRS and financial regulators, not to mention cannabis operators and companies.
With tax season upon us, confusion over whether medical marijuana is tax-deductible has come up, writes Marijuana Moment.
In an interview with C-SPAN's Washington Journal, IRS taxpayer advocate Erin Collins was asked by a caller from Nevada, where cannabis is fully legal, why he couldn't find an option on TurboTax to deduct his cannabis purchases!
Collins, appointed during the Trump administration, said she'd have to "plead ignorance on the marijuana" question "unless you're saying it's a medical deduction.
"If it is a medical expense, and then you have an option on your Schedule A, you could potentially put it there," she continued.
She was not exaggerating when she pled ignorance.
Not Deductible After All
In a statement to Marijuana Moment, Collins said medical marijuana purchases are not deductible after all.
"I had not previously studied the federal tax treatment of marijuana, and I speculated that marijuana might 'potentially' be deductible as a medical expense in certain circumstances," Collins said. "After the program, I checked the law. To clarify, medical marijuana is not tax-deductible for federal purposes under current rules."
The IRS clarified that it does not have discretionary authority to adopt policies that would allow cannabis-related deductions while the plant remains illegal under federal law.
Photo: Courtesy of Scott Graham on Unsplash
