Wednesday, August 4, 2010
Don't Bogart That Deduction: Is Medical Marijuana a Medical Expense?
I am responding to your letter, dated March 3, 2010, on behalf of your constituent, _____, [who] asked whether the cost of an herb prescribed by her doctor to treat migraine headaches qualifies as a medical care expense for purposes of her health care flexible spending account. ...
The cost of an herb may be an expense for medical care if the taxpayer can substantiate that he or she:
- Has a medical condition (disease, illness or injury);
- Is purchasing the herb to treat or alleviate the medical condition;
- And would not have purchased the herb “but for” the medical condition.
- Don't Mess With Taxes, One Toke Over the IRS-Approved Medical Tax Deduction Line
- Going Concern, Just So You’re Aware: The IRS Won’t Allow You to Deduct Your Pot as a Medical Expense
- New York Times, Deduct Your Dope
- Tax Girl, Just Say No: Pot Not Allowed as Medical Expense
- Tax Update Blog, What Are They Smoking?
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.
It's a trap. For tax returns, you need receipts stating who you gave your money to. They then need to declare the income. The tax has merely shifted to someone else.
Score 1 for the IRS.
Posted by: Gunslinger | Aug 4, 2010 12:01:20 PM
My wife is a big believer in Chinese medicine and takes (uncontrolled) herbal remedies for various things, as prescribed by her practitioner. We have long used an FSA to pay for these, and have never had an issue with it. Now that over-the-counter medications will be excluded starting next year, it is good to have this ruling to clarify the continuing eligibility of prescribed herbal remedies.
Posted by: Kevin | Aug 4, 2010 8:23:09 AM
So does this mean that say Im a caregiver and I am making hmmm lets say 100k a year I dont have to file taxes on it because its for medical marijuana which the IRS doesnt seem to recognize as a legit buisness.
Posted by: Jason | Aug 9, 2010 11:13:10 AM