The Obama administration said Friday it would allow people to sign up for plans on HealthCare.gov through April, and at the same time acknowledged it had sent some 800,000 people incorrect tax statements about their coverage in 2014. The announcement about the inaccurate forms caps a rough first year for the health-care law, and means many taxpayers will have to wait for tax refunds. The error affects as many as 20% of the statements sent by HealthCare.gov to people who signed up for coverage for 2014 and received tax credits to offset the cost of their premiums.
Never mind the fact that tax refunds are stupid and you should hope to break even when you file your tax return. But you guys know that. We'll just leave it there.
“Antitax voters clearly won a victory on Tuesday. But it would be a stretch to say that they don’t want higher taxes on the wealthy. More likely, they just didn’t want higher taxes on the nonwealthy.”
~ Robert Frank, on Washington’s rejection of Initiative 1098.
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:
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.
