HEALTHY LIVING
08/06/2010 03:33 pm ET Updated Nov 17, 2011

Can You Write Off Medical Marijuana On Your Taxes?

It may be legal to purchase medical marijuana with a prescription in 14 states, but is that pot tax-deductible as a medical expense?

Generally, it has not been considered tax-deductible due to its illegality under federal law, which guides the Internal Revenue Service's policies.

But a recent letter from an IRS agent to one of Senator Chuck Schumer's constituents raised questions and sparked hope among medical marijuana advocates that the federal policy had changed.

In response to a question about whether an unspecified herb used to treat migraines can be considered a medical expense, the IRS agent issued three prerequisites that qualify the purchase of an herb as a medical expense, according to a blog post by Paul Caron, a law professor at the University of Cincinnati College of Law, published with help from Roger McEowen, an agricultural law professor at Iowa State University, on TaxProf.com.

Asked whether marijuana adheres to the IRS demands, Professor McEowen told Huffington Post, "Of course. It satisfies each demand and by horticultural definition, marijuana is an herb" but he emphasizes that the IRS created an exception in this case by excluding marijuana from becoming a medical expense.

Though the letter seems to indicate an opening for the tax-deductible status of pot, an IRS revenue ruling from 1997 makes this most recent development a moot point. The ruling (Rev. Rul. 97-9) states: "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."

While federal taxation seems unavoidable under that ruling, the lack of tax-deductible status for medical marijuana on state taxes is sure to face some scrutiny.