As states and cities struggle to close budget gaps, the possibility of taxing marijuana sold for medicinal purposes has received more attention.
But even if you are allowed to purchase the plant to treat a medical ailment, you'll have to do so totally on your own dime. IRS Publication 502, Medical and Dental Expenses, specifically states on page 15: "You cannot include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc.), in violation of federal law."
And since most health savings accounts follow the IRS rules on what products and services are eligible for reimbursement from a medical flexible savings account, or FSA, that means that you cannot use this pre-tax account money to pay for the federally illegal treatment.
Or can you?
Roger E. McEowen, who's fittingly the Leonard Dolezal Professor in Agricultural Law and Director of the Center for Agricultural Law and Taxation at Iowa State University, wrote the TaxProf Blog about an IRS letter that seems to sanction the treatment of marijuana as a medical expense.
In the correspondence with Sen. Charles Schumer (D-N.Y.), the IRS says the "cost of an herb may be an expense for medical care" under certain circumstances, such as taxpayer (and doctor) substantiation that the plant will treat or alleviate a medical condition.
The patient also must show that he or she wouldn't have purchased the herb "but for" the medical condition. Sure thing. Will do, or rather, won't do.
I appreciate Prof. McEowen's attention to agri-tax, but I think he must have another degree in English, specifically semantics.
The IRS letter to Sen. Schumer never uses the word "marijuana," just the word "herb."
I'll guarantee that if the wacky weed had been expressly noted as the herb in question, the IRS response would have been completely different.
- Pot's potential to help pay state bills
- Spend your FSA
- Drug tax dealings in Tenn., Calif.
- Taxing ill-gotten gains
- California tax votes June 8
- Nevada decides against taxing one sin
- Money-hungry states, cities tax trolling
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