Talking Cannabis Taxes: Exploring How Medical Cannabis Fits Into Illinois Tax Law
The following article explores the role of medical cannabis within the context of Illinois Tax Law as an example. Special thanks to Taylor Schuck, Senior Accountant, Mueller CPA for his expertise and collaboration!
Medical Cannabis Taxes and Your IL-1040
As cannabis continues to make a growing impact on the world at large, it’s implications on how one approaches their taxes is not something often discussed. While talking taxes may not be the most exciting topic of conversation after medicating, there are some things you should know.
Can I Get Tax Deductions Off My Medical Cannabis Expenses?
When completing your IL-1040 for 2018, you might notice Line 22 in Step 7, titled the Compassionate Use of Medical Cannabis Pilot Program Act Surcharge. This tax is only imposed on owners of medical cannabis businesses that receive capital gains, but it might have you wondering: can I deduct any personal income that was spent on medical marijuana throughout the year? As part of the Opioid Alternative Pilot Program, Illinois has started to grant medical marijuana cards to qualifying patients and caregivers. Unfortunately, however, currently, you cannot deduct these expenses on your tax return. Here are some reasons why.
Cannabis’ Schedule I Status Gets in the Way Once Again
Foremost, given the federal status of cannabis as a Schedule I substance, it is technically still illegal. The IRS is a federal agency, and state legislation does not supersede that of the federal—state laws don’t matter to the IRS. In fact, the IRS explicitly states:
You can’t include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc.) that aren’t legal under federal law, even if such substances are legalized by state law.” – (Internal Revenue Service; Publication 502 Cat. No. 15002Q Medical and Dental Expenses (Including the Health Coverage Tax Credit). Download the Medical and Dental Expenses 2018 IRS Handbook here: p502
No Way to Deduct Medical Expenses on the IL 1040 Personal Tax Return
At the present date, it is currently impossible to deduct medical expenses on the Illinois 1040! Therefore, we are still a far shot away from being able to deduct something like medical cannabis expenses.
Out of Pocket Until Further Notice
For now, medical marijuana continues to be an out-of-pocket expense. As legislation shifts and the landscape evolves, one can only hope that someday medical cannabis patients in IL will finally get a break!