What deductions can I take for my marijuana (cannabis) business?

While all income must be reported, the only deduction a marijuana-related business can take is for the direct cost of goods sold. You may only deduct the cost creating a sellable product, for example the seeds or plants directly related to cannabis production, and the labor and materials necessary to harvest and package your product for sale. You can't deduct the expenses involved in selling the packaged product. Review the IRS Marijuana Industry webpage and FAQ because of how complex this is.

Although marijuana (cannabis) is legal in many states, it’s still federally classified as a Schedule I controlled substance, and selling this substance is currently considered an illegal activity by the federal government. As such, marijuana-related businesses are restricted under IRC 280E of the federal tax code. Under these restrictions, even if a dispensary or other marijuana business is licensed by the state, it isn’t eligible for any business deductions except for costs of goods sold.