MEDICAL MARIJUANA: IRS BARS MEDICAL COST DEDUCTION
The Internal Revenue Service has jumped "into a politicalThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
and medical controversy" by ruling "that taxpayers cannot deduct
the cost of marijuana as a medical expense," NEW YORK TIMES
reports. The ruling, issued February 14, "was another strike by
the Clinton administration against new laws in California and
Arizona" that legalized the medical use of marijuana. Currently,
"federal tax code allows deductions for medical expenses not
covered by insurance only to the extent that they exceed 7.5% of
a taxpayers income," but because "the threshold is so high ...
such deductions are claimed on fewer than five percent of tax
returns." TIMES reports, however, that the new rule "has a much
broader application because it means that employee benefit
packages called cafeteria plans cannot cover marijuana expenses
as part of their medical insurance." Under such plans,
"[b]enefits that are not tax deductible cannot be offered."
Approximately 40 million Americans are enrolled in cafeteria
plans, and, TIMES reports, such plans are particularly popular in
the San Francisco area, which has been a center of the medical
marijuana dispute because of the high percentage of AIDS
ONLY LEGITIMATE DEDUCTIONS: Donna Crisalli, an IRS attorney
involved in drafting the rule, "said the agency had no
alternative but to make marijuana expenses nondeductible." She
said that the "law allows deductions only for prescribed drugs
and does not allow deductions for purchases that are illegal."
Crisalli also said that one of the reasons the IRS issued the
rulings was "the administration's interest." Ken Feltman,
executive director of the Employers Council on Flexible
Compensation, said "he had informally asked the IRS to rule on
the tax status of marijuana" because he had been contacted by
benefits managers of California cafeteria plans "who wanted to
know what to do if a worker sought insurance reimbursement for
marijuana expenses" (Rosenbaum, 2/23).