Just So You’re Aware: The IRS Won’t Allow You to Deduct Your Pot as a Medical Expense
Apparently there’s been a bit of unnecessary confusion out there about the deductibility of marijuana for medical purposes. The Wall St. Journal article that we linked to this morning discusses the problems employers are encountering wi e.g. can’t use HSA funds; they don’t care if you’ve got a card, if you test positive you’re fired).
But the question of deducting the cost of your White Widow et al. that you legally purchase in states like California and Colorado has been making the rounds. After a little discussion, it’s pretty clear that the IRS is not going allow you deduct your pot for tax purposes simply because it’s still illegal at the Federal level. Doctor’s note be damned.
The confusion arose due to the following letter that was sent to New York Senator Chuck Schumer, who had sent a letter to the IRS inquiring about a constituent using a “herb” to treat migraine headaches:
Talk about a vague response from the IRS. Tax Girl explains:
As with many facets of how to treat medical marijuana for tax and other purposes, it appears that those in charge are merely tiptoeing around the question. In the letter, the term “marijuana” is never used explicitly – the term used is “herb”. While it’s my understanding that the specifics of the case involved medical marijuana used for the treatment of migraines, that isn’t specifically stated in the sanitized version of the letter. No use of “marijuana”, just the term “herb.” That could be St. Johns Wort or milk thistle as far as the IRS is concerned.
Fortunately TaxProf Paul Caron clears up for us in a couple of updates from his latest post on this issue:
Update #2: Rev. Rul. 97-9, 1997-1 CB 77, specifically precludes a medical expense deduction for medical marijuana:
An amount paid to obtain a controlled substance (such as marijuana) for medical purposes, in violation of federal law, is not a deductible expense for medical care under § 213. This holding applies even if the state law requires a prescription of a physician to obtain and use the controlled substance and the taxpayer obtains a prescription.
So the IRS in Info. 2010-0080 either was (1) signalling a retreat from its position in Rev. Rul. 97-9 by not mentioning the federal legality of the substance; (2) implicitly referring only to legal herbs (and hence not covering marijuana).
Update #3: I am told by an enterprising reporter that the herb in question in Info. 2010-0080 is Petadolex, so it appears that interpretation #2 above controls and the conclusion in Rev. Rul. 97-9 denying a medical expense deduction for medicial marijuana still obtains.
So there you have it. Regardless if you have glaucoma, cancer, HIV, chronic pain, high anxiety or any ailment that marijuana can effectively alleviate, don’t bother trying to include it on Schedule A. We’d ask the IRS to implore a little common sense here but legally, as long as marijuana remains illegal at the federal level that’s not going to happen. And from a more practical standpoint, we’re still talking about the IRS.
Don’t Bogart That Deduction: Is Medical Marijuana a Medical Expense? [TaxProf Blog]
Just Say No: Pot Not Allowed as Medical Expense [Tax Girl]