Cannabis businesses can’t deduct business expenses other than the cost of goods sold. This is because Sec. 280E in the Tax Code bars any deduction for a business that traffics in a controlled substance and marijuana remains a controlled substance under federal law. However, an employee at the IRS Office of Chief Counsel (Small Business/Self-Employed) said at an American Bar Association meeting on February 19, that the IRS would not deny owners of pass-through entities growing or selling cannabis their ability to claim the qualified business income (QBI) deduction. This deduction, which is up to 20% of QBI, is a personal deduction based on business income. #IdeaoftheDay
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