The IRS Has Clarified That Marijuana Purchases Are Not Tax Write Offs

The IRS Will Not Allow Marijuana Sales To Be A Tax-Deductible

If anyone was on the hunt to find out if your medical marijuana purchases are able to be deducted from your taxes the answer is not at all. Yet there were some things unclear about the tax options. This came following the IRS National Taxpayer Advocate Erin Collins was asked about the issue. She was recently approached with this question during an interview with C-SPAN’s Washington Journal.

Someone from Nevada presented the question of why he wasn’t able to deduct cannabis purchases on TurboTax. Which are legal under state law but not federally. The official responded that she’d “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 said.

Marijuana is legal for medical and recreational use in the state of Nevada. However, the caller didn’t say whether he was a legal cannabis patient. Though federal law is evident, Collins was appointed to her role by the Trump administration. Still Treasury Secretary Steven Mnuchin in 2020—said there was “potentially” an opportunity to claim deductions if it was medical marijuana he was purchasing. Collins explained in a statement to an online publication this past week that that was not the issue.

IRS And Legal Cannabis Purchases In The United States

“While answering viewer calls on C-SPAN Washington Journal yesterday, one viewer asked about the deductibility of marijuana purchases he had made,” she said. “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. After the program, I checked the law. To clarify, medical marijuana is not tax-deductible for federal purposes under current rules.”

IRS is an organization that falls under the Treasury Department. With this, the IRS said it doesn’t have discretionary power to adopt policies. Specifically, that allow marijuana-related deductions while cannabis is still federally illegal. However, the IRS has taken action to make things clear on tax policy for state-legal marijuana businesses.

De Lon Harris, commissioner of examination at the IRS Small Business/Self Employed Division, recently spoke on the matter. He talked about tax-related issues in state-legal marijuana markets in a webinar. WHich was hosted by PBC Conference. He stated that while cannabis is still federally illegal, businesses that deal in controlled substances must still file federal taxes. Which the IRS has claimed they are here to help.

Harris also provided suggestions for marijuana businesses for complying with taxes. AS well the IRS separately hosted a forum back in 2021 committed to tax policy for marijuana businesses and cryptocurrency.

Pushing Forward On Cannabis Purchases Being Decdictable In The Future

Another top IRS official who’s was once with the agency also partook in a PBC Conference webinar 2 years ago. This IRS official presented comparable guidance to cannabis businesses. All while also acknowledging that the legalization movement will possibly thrive in terminating prohibition in “all states.”

Acting Treasury Secretary Janet Yellen spoke back in 2021 on legal marijuana and taxes. She said that freeing up banks to work with state-legal marijuana businesses would “of course” make the IRS’s job of collecting taxes more manageable.

Mnuchin, frequently addressed the issue, saying the current policy friction creates “significant problems” for IRS and financial regulators. It “creates significant risk in the communities for collecting this amount of cash. It’s problematic,” he said back in 2021.

Final Thoughts On The IRS Not Allowing Cannabis Purchases As Deductibles

Former National Credit Union Administration Chairman Rodney Hood criticized Congress for failing to advance marijuana reform. He also talked about the demand for federal financial regulators to take a “principles-based approach to cannabis banking.” As well as “delivering a preliminary regulatory framework that we can share with other regulators and members of Congress. For who share our concern about addressing these problems.”

Hood also recently said that marijuana legalization is not a question of “if” but “when,” and he’s again offering advice on how to navigate the federal-state conflict that has left many banks reluctant to work with cannabis businesses.

Source link